Let’s examine some reactions that buyers of data products are having to the recession. Or downturn. Or uncertainty–whatever you want to call it.
OK, the bad news first. You thought the bad news was going to be that everyone’s budgets dried up? No!
The bad news is that we didn’t get enough responses to the survey! But the responses we did receive are valuable. That’s good news!
So I cannot break things down for you by company size, geography, and industry. I was able to observe some patterns.
Overall there is some good stuff in here. Treat it as anecdotal I hope it is helpful.
(I did get some survey responses with answers like “jpsdfaskejks” and “ur mom” – let’s discard those, as they won’t be quite as useful)
Plus, I talked with many of you to learn what you are seeing from interactions with customers and prospects. Although second hand, it was enlightening. This info augmented what I gathered from the survey.
Ready? Let’s get into it
Core budget is staying the same
No one in the survey chose the option that budgets are increasing greatly (more than 20%).
This is not surprising, and confirms what we all suspected.
However, core budget is staying mostly the same, as reported by the survey participants.
This bodes well for renewals, but not for increasing NRR or more new deals.
Switching is active!
I assumed everyone would just hunker down with their current vendors, or ask for price concessions . This is happening generally, but there is an active contingent that is looking to switch one or two products.
Buyers will likely be more direct with you about where they are entrenching, and which products are up for review. You can spend more time where the opportunity is there.
If you have a product priced lower than the competition, now is the time to strike.
However, I suggest a more nuanced approach than a race to the bottom from oversized discounts.
If a competitor's product is implemented differently than what the vendor intended, it can result in costs being too high. So even though the pricing as designed is reasonable (or cheaper than your product), the TCO might be painfully high.
Now, what they could do is revisit the implementation and their use case and see if the situation can be salvaged. But from my experience in this situation, the root cause matters much less than you might think.
What matters to the buyer is the emotional response of costs being way too high, and the pressure the buyer is feeling from management to get things under control.
Most people report deals are subject to more scrutiny than before. Everyone’s boss, grandboss, and great-grandboss is looking over everyone’s shoulder more than before.
This makes sense to me because no one wants to be singled out as the person who wasn’t careful enough.
So you may have more hops up the chain to approve a deal, which takes more time. (This also leads to a couple more observations: deal cycle lengthening and CFOs getting involved. More below)
The higher you have to go up the chain, the less people care about the details and features of your product. Demos aren’t going to help here.
The higher you go up the chain, the more aware you must be of strategic priorities and constraints that those individuals might be facing. More scruitiny = more effort and prep for you.
Deal cycle is lengthening
This is another obvious assumption that the research confirms.
I don’t know how much longer deal cycles have become. You probably see it in the form of missed targets and more delays.
I suspect this is from a combination of general hesitancy and more scrutiny. In any case, close dates will probably be pushed out.
CFOs, controllers, COOs getting more involved
Finance folks are involved in almost every deal now. Buyers feel they must get a review by someone in finance (or sometimes operations).
Not many companies have put in more restrictive pricing thresholds than before. But buyers feel the need to pull in finance folks for deal reviews. Whether mandated or just implied, it is happening.
So you need to be able to speak to them on their terms.
From my experience, these people couldn’t care less about the features of your product. Sometimes they will sit in a demo, but that isn’t going to make or break their decision.
Your champion or buyer will vouch for the effectiveness of your product. That is enough for them from that angle.
To approve, the finance folks need either
- a spreadsheet staring them in the face that your solution will favorably affect costs. This is usually about price. But in some cases other terms–like a monthly pricing option–could be appealing to them.
- a strong narrative that the increased capability justifies your cost. This narrative is 100 times more effective coming from your champion or buyer, rather than from you.
Headcounts shrinking or staying the same
Hiring is slowing or shrinking. Nothing surprising here, and the research confirms it.
But the amount of work to be done is not shrinking, so perhaps there is opportunity here.
Some of our customers are backed by private equity groups. These PE firms recognize that, generally, a data-driven company has a much higher resale value than otherwise.
Do you have a product that will allow your customer to do more with data, with fewer people? This will touch on an emerging pain point as layoffs and hiring freezes are becoming common.
People have not abandoned hope or slowed down, or anything like that. But they are a lot more focused than before.
Their roadmaps of what they want to accomplish are relatively unchanged. They are honing in and spending more time on their top priorities. They are more clear about what they want. And putting some of my own interpretation on it, I see them actually being more aggressive about these refined, tighter priorities.
On the flip side, they are almost ignoring the less important things.
This means that nothing speculative will fly. R&D efforts, exploratory efforts–they’ve all been deferred.
It means that you must focus on a business case that matters to the buyer. Something that will product measurable results in 1-2 quarters.
“Efficiencies” is too general. “Data democratization” is too general. “Data literacy” or “data-driven” are too general.
Marketing and customer acquisition
The data we gathered shows data product buyers are subject to the general business trends during a recession. Some companies cut way back on marketing and advertising, some go more aggressive.
This translates into some data teams being more focused than before on more efficient marketing and advertising, such as customer 360 and data activation into sales-oriented systems.