The New Competitive Cocktail – Why Your Customers May Not Be Buying Their Next Service From You

In our last blog post, we saw that our customers are buying more cloud services, our overall market is growing rapidly, and the majority of our customers are highly satisfied with you, their service provider.

We also saw that these customers don’t necessarily plan on buying their next cloud service from their current provider.

So, the question is, why is this happening, and more important, what can you do about it?

As far as why this is happening, it turns out that today’s customer has a variety of behaviors that don’t work in your favor.

Before we jump into the research, I want to share a personal story with you, to show how most of us currently think about customer loyalty.

My 84 year-old father likes to stay busy, and always has a few projects going. He shops at the same hardware store for everything he needs, because he knows the store’s layout, knows he can talk to a guy (or gal) if he has a question, and he appreciates their long-term commitment to providing the hardware he needs, year after year. Sure, there are other “big box” hardware stores in our community, and they might be able to sell things cheaper and offer a bigger selection, but that’s not important to my dad, and he doesn’t want to harm his local hardware store by taking his business elsewhere.

Sound familiar? It’s the model most small businesses think of when they approach their daily decisions: loyal customers will appreciate the work we do, and will reward us by continuing to buy their goods and services from us versus shopping around.

Unfortunately, this “loyalty model” might be true in some situations, but it turns out that this model doesn’t represent the cloud services buyer very well.

The New Competitive Cocktail: Ingredient #1 – New Buyer Behavior

Instead of the traditional customer loyalty model you might expect, here are a few ways today’s cloud services buyer describe themselves, according to a recent Ernst & Young study:

  • Impatient
  • Digitally driven
  • Savings motivated
  • Less focused on brand
  • Relies on influencers for the latest advice
  • Prone to impulse buying

Clearly, many of these customers will choose to do business with a reputable vendor who is delivering superior service at a competitive price, but “complete loyalty” is not a feature you can expect to see from this crowd anytime soon.

The New Competitive Cocktail: Ingredient #2 – New Hosting Entrants

The second reason customer loyalty might not be a powerful predictor of future purchase behavior is because customer expectations are constantly changing – something that is particularly true within the hosting sector. This means the services you sold to your customer a few years ago may not be the powerful motivation they need to consider you for the next purchase they make.

Here’s proof: Looking at Google Trends data, we can see that common search terms from a few years ago, such as Web Hosting, Ecommerce Hosting, Dedicated Server, and PHP Hosting, have all dropped off dramatically over the past few years:

 

At the same time, Google Trends has shown a dramatic surge in the search patterns for “specialized” web hosting search terms such as WordPress Hosting, WebApp Hosting, Shopify, Woocommerce, AWS, Linode, and Digital Ocean.

 

 

Offering generic hosting services might work for customers that are standing still, but appealing to today’s movers and shakers requires specialized solutions and the ability to compete with the latest market darlings.

The New Competitive Cocktail: Ingredient #3 – The ISV Direct Threat

One of the reasons customers aren’t buying the next cloud app from their service providers is because that very same app is available directly from the manufacturer, or ISV. So, while your customer might consider purchasing Office 365 or WebEx through you (if they even know you offer it), they also are seeing tons of news and promotions directly from these ISVs. And Microsoft, Cisco, and Salesforce have huge marketing budgets, so this onslaught is not going to slow down any time soon.

 

 

In order to outcompete these ISV direct threats, you need to make sure you’re communicating clearly, directly, and regularly with your customers to offer them the latest solutions in a competitively differentiated way.

A Potent Mix

Together, these three ingredients could prove to be an incredibly potent mix for partners who are counting on business as usual moving forward. But wherever there is change, there is opportunity. How can you turn these buyer behaviors to your advantage? And how can you concoct your own “cocktail” for success?

To find out, Parallels asked the same 773 customers detailed questions to find out what they want from you, and how they really make purchase decisions.

To find the surprising answers they gave us, check out next week's post.

 

Posted on August 21, 2014 and filed under Cloud Service Delivery.