Companies are used to a simple view of the world: sell to small companies or to large ones?
With the growth of on-demand business models, more companies are trying to deliver products and services to both small and large customers (including departments of large customers).
There's a potential complexity trap here. In evaluating your customer segments, consider complexity to sell and deliver the solution in addition to the size of the company or its budget:
Another way to think about the vertical axis might be "Willingness to pay for complexity". In essence, how likely will this kind of company actually commit enough money to fixing the problem? Including money to cover all the hidden costs your own company will incur through support, product development, and other services?
The trap companies fall into, especially younger ones refining their customer and sales models, is trying to deliver a complex solution to businesses or departments who aren't willing to pay for the complexity. That's the worst of both worlds.
If you can charge large premiums for delivering a simple product, does that mean your competitors can easily copy you and undercut your prices? What are your barriers to entry and differentiators that will maintain your pricing premium?
Wednesday, December 20, 2006
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