How to Stop your Customer from Becoming your Competitor
When selling software solutions to the global corporate and investment banking community, I can't count how often my customers’ IT department pitched to build my product “in house”. Similarly, I faced this problem when taking my first tech startup to market - entrepreneurs bringing great ideas to businesses, only to be the victim of their customers copying their minimum viable product. It's a cruel world.
Intuition, experience, and asking the right questions can indicate if a customer (or potential customer) is ripping off your system. Continuing with the example of selling a technology product, here are tell-tale signs:
1. Hitting every button and feature of your product.
If the usage report doesn't tally with the customer’s business needs, then it's suspicious. Excessive usage of unrelated functionality is a good trigger to connect and understand the change in use.
2. The customer is sheepish in the trial period.
Despite positive feedback, there is no commitment to proceed, and the customer repeatedly reminds you they “might not go with it”. It's one of those meetings where you think it went well, but as the timeframe drags and forces reflection, you realise it wasn't right, because their words didn't match their actions.
3. A failure to ask obvious questions.
Successful sales processes have defined stages of commitment. Interested customers ask questions and take an interest in understanding the business impact of working together. If this isn't happening, and the product is heavily used, and all the conversations are positive, it's reasonable to question their motives. Also, asking overtly technical questions that do not solve practical business challenges is a warning sign.
You can argue these are symptoms of all competitive situations and out of your control. If a customer wants to build its own products, that’s their prerogative. However, customers don't always understand the complexity of building products themselves.
The following points should not only discourage competitive aspirations, but are integral to a well-executed sales process.
1. Operational Impact
It's one thing to build a technical interface, but most “in house” systems fail to consider how it will be supported. What happens when a problem occurs, training is required, or the superuser leaves the business? People don't want more work and will soon be against the idea.
When speaking with the customer focus on the crucial importance of your operational support teams.
2. Core business focus
Why divert time, budget, and focus from core objectives, when an expert product has already been built for a fraction of the cost?
When speaking with the customer explain the complexity of building a similar system and sell your product and industry expertise.
3. Limited functionality
What happens when a new feature must be added? Technology systems quickly become dated, and if the IT budget is diverted, the result is a system that doesn't develop or meet requirements.
When speaking with the customer explain your product development is based on collective insight of the market. This benefits all customers. If possible, support your claims by naming your clients (preferably competitive). Sell your relationships, product expertise, insight, and future features.
4. Cost analysis
The cost of building a system is not the cost of running it, and hard numbers supporting the cost of building, supporting, and developing the product are a great way to back your claims.
When speaking with the customer explain the investment your company has made (how it's broken down) to ensure your system is supported and continues to innovate. Sell your company, vision, and ability to support the customer going forward. Have a disaster story of a similar client who tried to build their own system and whose business you won months later. Detail the grief and wasted investment caused to the company.
Nobody wants their product ripped off, but these situations aren't always bad. It is the customer’s prerogative to build their own products (so long as it doesn't breach their supplier contracts), and it is important to take your ego out of the equation and view the situation with cold eyes. I have previously watched my customers waste $millions, building products I knew they couldn't support. In these instances, the opportunity lies in maintaining the relationship, helping with obstacles, and being a trusted partner if it goes wrong.
Whether you chose to cut the relationship or nurture it for future business, the best approach is to identify the situation early, discourage the idea as part of your sales process, and avoid the worst possible deal outcome: LOSE:LOSE.