The Challenge: Gain Market Share in a Competitive Market
The unified communications (UC) market is extremely competitive, with large providers battling with emerging leaders for market share. One of these emerging leaders is ShoreTel, offering brilliantly simple IP phone systems and UC solutions.
After the Great Recession ShoreTel saw a fundamental change in the telecommunications buying process. The CIO and director of telephony no longer had buying power. Instead, CIOs, CEOs and boards made the purchase decisions. In addition, more than 50% of customers required quantifiable proof that they were making the right decision when they invested in telecommunications equipment.
“ShoreTel was a challenger brand, so buyers were biased towards the market leader,” said Mark Arman, former Vice President of Business Development at ShoreTel. “Since most of our prospects had worked with the market leader in the past, they thought it was less risky to maintain the status quo.”
ShoreTel saw a big opportunity to gain market share. Many buyers didn’t realize that the market leader would cost twice as much as ShoreTel over the first seven years. ShoreTel had economic advantages in terms of reliability, downtime, electricity consumption and maintenance costs.
However, ShoreTel couldn’t prove these advantages.
ShoreTel needed to tell its total cost of ownership (TCO) story. This would empower advocates to build a case for ShoreTel during board meetings. It would also disarm buyers who were biased towards the market leader.
The Opportunity: Make It Easy for Customers to Build a Business Case for ShoreTel
ShoreTel wanted to provide its sales reps and customers with a tool that would build out financial projections and show long-term TCO. This tool needed to do the following:
1. Adjust for each customer’s exact circumstances
2. Base its cost estimates on independent third-party data
3. Allow customers to modify their financial assumptions
“We wanted to give customers a tool that would produce clear TCO reports,” said Arman. “Then, they could take these reports to their boards and build a business case around ShoreTel’s favorable TCO.”
The Solution: Launch an Online TCO Tool That Quantifies ShoreTel’s Value
ShoreTel launched the ShoreTel Online TCO tool (powered by Alinean), which has a public version on the company’s website and a private version for partners and sales professionals. The tool analyzes the lifetime TCO of various UC solutions, comparing ShoreTel head to head with legacy phone systems and competing vendors.
Customers can log into the public tool at any time and change their assumptions. They can customize the tool for their unique architecture and location. For example, customers can get financial projections in their currencies and plug in local labor rates. When they are done, they can press a button to receive a board-ready Word report, an executive summary or a PowerPoint presentation.
“The TCO tool allowed customers to zero the price for the market leader’s equipment. Customers realized that even if they didn’t pay for our competitor’s equipment, they would still save 30%-40% with ShoreTel,” said Arman. “This showed buyers that they should think of TCO, as opposed to basing their decision solely on upfront costs.”
The Alinean powered TCO tool also showed customers the costs of doing nothing, which helped ShoreTel engage buyers earlier in the sales process.
ShoreTel supported its economic messaging with a Lowest TCO Guarantee program. If the TCO tool or independent third-party data proved that another vendor cost less, than ShoreTel would lower its price to beat the competition. After five years, only one customer inquired about the guarantee.
“We built the TCO story into all of our sales and marketing, as it’s one of the most important proof points in this evolving and changing industry,” said Arman. “Our architecture had lots of advantages, and the tool was the final proof point for these advantages.”
Sales training was also a vital part of the TCO tool’s success. ShoreTel certified sales reps and partners on how to use the tool. They received training via webinars, videos and in-person sessions. ShoreTel also told reps not to give customers discounts if they didn’t first use the TCO tool.
The Results: Value Selling Helped ShoreTel Boost Its Revenue by More Than $30 Million Per Year During the First Five Years
During a five-year ramp up, 30% of ShoreTel’s deals involved the TCO tool and methodology. The TCO tool consistently demonstrated that ShoreTel cost 50% less than the market leader and 20%-30% less than its other competitors. This – combined with the TCO Guarantee – significantly boosted ShoreTel’s competitive win rate and resulted in at least $30 million per year in incremental revenue over the next five years. ShoreTel’s revenue was 10% higher than it would have been without the TCO tool and methodology.
Before value selling, ShoreTel had an average win rate of 62%. When sales reps used the TCO tool and methodology, win rates jumped to 90%.
In just the first few years of the program, the Alinean powered TCO tools had closed more than several thousand customers with the new selling methods. More than 250 sales reps and partners were using the TCO tool, and the self-service online version received more than 600 unique visitors and 150 customized reports per month.
The TCO tool also helped ShoreTel increase its margins. Customers saw how ShoreTel would benefit them over the long term and stopped focusing solely on price. With the tool, many reps closed deals at more than half a million dollars over the market leader’s price.
“We’ve developed a reputation for proving – time after time – that we have profound economic advantages. This has shortened our sales cycles, as large customers now give us the benefit of the doubt,” said Arman. “I once walked a client through the TCO tool. After 30 minutes, he said that he had all the information he needed and signed a PO the next day.”
While Arman was with ShoreTel, he was brought in to help close 70 deals. He used the TCO tool to close 66. “The only four that we lost were ones where our competitor gave away equipment for free,” said Arman.
A huge key to ShoreTel’s success is its commitment to helping customers achieve specific outcomes. Reps always discuss outcomes and follow up to ensure that customers are hitting their targets.
“You can’t be successful in solution selling if you’re not personally invested in outcomes,” said Arman. “This helps customers see you as a trusted advisor, which drives long-term value for both you and your customers.”
Hear directly from Mark Arman about the success of his ROI / TCO Tool program (powered by Alinean) in this independent on-demand webcast from Smart Selling Tools.
- Migrated from spreadsheets to TCO tool
- Generated $30 Million+ Per Year
- Used on 30% of all deals by 250 sales reps and partners
- Self-service online version received more than 600 unique visitors and 150 customized reports per month.
- Bumped win rates from 62 to 90%.
- 10% higher revenue than deals without the TCO Tool