{"id":32948,"date":"2023-09-10T21:15:45","date_gmt":"2023-09-10T21:15:45","guid":{"rendered":"https:\/\/greatdemo.com\/?p=32948"},"modified":"2026-09-15T19:26:52","modified_gmt":"2026-09-15T19:26:52","slug":"the-advantages-of-the-incumbent-vendor","status":"publish","type":"post","link":"https:\/\/greatdemo.com\/the-advantages-of-the-incumbent-vendor\/","title":{"rendered":"The Advantages of the Incumbent Vendor"},"content":{"rendered":"<p style=\"text-align: center;\"><strong>The Advantages of the Incumbent Vendor<\/strong><\/p>\n<p style=\"text-align: center;\"><strong>Leveraging Its Impact on Managing Competition, Renewals and Expansion Sales<\/strong><\/p>\n<p style=\"text-align: center;\"><strong>(A Never Stop Learning! Article)<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: center;\">\u201cGet their data, and their hearts and minds will follow\u201d<\/p>\n<p style=\"text-align: center;\">Michael Cusumano, The Business of Software<\/p>\n<p>&nbsp;<\/p>\n<p>Let\u2019s explore some of the advantages enjoyed by being the incumbent vendor and how you can leverage this position for renewals and expansion sales, while holding your competition at bay. We\u2019ll examine:<\/p>\n<ul>\n<li>Leveraging sunk costs, time and energy investment<\/li>\n<li>Change avoidance<\/li>\n<li>Risk avoidance<\/li>\n<li>Burn victims<\/li>\n<li>Social capital<\/li>\n<li>Users\u2019 Groups<\/li>\n<li>Leverage<\/li>\n<\/ul>\n<h2>Vendor Selection \u2013 Sunk Costs, Time and Energy Investment<\/h2>\n<p>First, it is likely that a large amount of energy was expended by your customer in bringing your software aboard and implementing it successfully into production use. Very simply, this is work they really don\u2019t want to do again, without a <em>very<\/em> compelling reason to change!<\/p>\n<p>This can be compared to a trek where you and your customer climb a mountain together. After a great deal of preparation work and an exhausting ascent, you and your customer are now enjoying the view from the summit. Starting again at the bottom with another vendor is not a pleasant thought!<\/p>\n<p>The climb probably included the following energy investment:<\/p>\n<ul>\n<li>Problem Recognition: At the beginning of your customer\u2019s process, their first stage was realizing that they have a problem, followed by an effort to define it accurately. Additionally, the owner of the problem may have struggled to convince others that it was important to solve and to allocate budget and other resources to make it a real project. That took significant work and political capital as well.<\/li>\n<li>Solution Evaluation: The bigger the problem (and the more expensive the solution), the more thorough the evaluation process. Your customer may have had numerous discovery calls, demos, and other discussions with several vendors, including you. There may have been an RFP process, competitive bakeoffs or POCs executed with multiple people involved from the customer\u2019s side. This could have consumed several people\u2019s time over a period of months.<\/li>\n<\/ul>\n<p>Here\u2019s a partial list of the activities your customer may have completed:<\/p>\n<ul>\n<li>Formation of a buying committee<\/li>\n<li>Problem and timeline definition<\/li>\n<li>Researching solutions<\/li>\n<li>Internal \u201cbuild vs. buy\u201d discussions<\/li>\n<li>Managing \u201c<a href=\"https:\/\/blog.goconsensus.com\/sales\/buyer-enablement\/how-much-is-group-buying-dysfunction-costing-you\" target=\"_blank\" rel=\"noopener\">Group Dysfunction<\/a>\u201d<\/li>\n<li>Identification of possible vendors<\/li>\n<li>Initial discussions with SDRs or BDRs<\/li>\n<li>Initial demos<\/li>\n<li>Discovery conversations<\/li>\n<li>More demos<\/li>\n<li>Vendor elimination to a \u201cshortlist\u201d<\/li>\n<li>Data privacy and security reviews (often extensive)<\/li>\n<li>IT architecture reviews<\/li>\n<li>Reference checks and other social proof<\/li>\n<li>Vendor bakeoffs or POCs<\/li>\n<li>Building and presenting the business case<\/li>\n<li>Vendor selection (and communication with the losing vendors)<\/li>\n<li>License agreement terms negotiation<\/li>\n<li>Purchasing SOW and terms negotiation<\/li>\n<li>Price negotiation<\/li>\n<li>Raising the purchase order(s)<\/li>\n<li>Signing the license agreement<\/li>\n<li>Implementation discussions<\/li>\n<li>Each of these steps involved members of the buying committee, often <em>plus<\/em> other impacted departments, including Data Privacy, Security, Governance, IT, Purchasing, and Legal, plus senior management, as well as users and users\u2019 managers.<\/li>\n<\/ul>\n<p>That was a <em>big<\/em> investment! And all of the above are now sunk costs that organizations <em>don\u2019t<\/em> want to reincur.<\/p>\n<p>That\u2019s a <em>lot <\/em>of climbing with a large team, in our analogy. Perhaps it\u2019s more like an expedition seeking to summit a major peak like Everest or Mount Khuiten. And while the expedition <em>did<\/em> reach the summit, consider how many people contributed substantial time and energy in planning and logistics, preparing gear, load-carrying, and camp setup and maintenance, not to mention repairs and rebuilding after a serious storm. This may be very similar to the internal processes and challenges involved in selecting a vendor!<\/p>\n<p>&nbsp;<\/p>\n<h2>Solution Implementation \u2013 More Sunk Costs, Time, and Energy Investment<\/h2>\n<p>That was selection, now for implementation:<\/p>\n<ul>\n<li>Solution Onboarding: It is likely that you and your customer invested significantly in the process of implementation. It\u2019s another, different expedition:<\/li>\n<li>Assembling the implementation team<\/li>\n<li>Implementation kickoff, strategy and planning meetings, and assignment of resources<\/li>\n<li>Pre-installation or implementation assessment<\/li>\n<li>Installation, as necessary<\/li>\n<li>Administrator training<\/li>\n<li>Customization meetings to determine and agree upon fields, configuration and profile parameters, dashboard layouts, processes, rules, approvals pathways, alert thresholds, etc.<\/li>\n<li>Data migration; data loading; QC<\/li>\n<li>Implementation of configuration, profiles, processes, rules, alerts, dashboards, etc.<\/li>\n<li>Interoperability testing with the customer\u2019s existing software and communication with those vendors<\/li>\n<li>Pre-rollout QC<\/li>\n<li>User training<\/li>\n<li>Go Live and initial rollout<\/li>\n<li>Tuning and changes as needed<\/li>\n<li>Broader rollout<\/li>\n<li>Internal progress reviews and updates<\/li>\n<li>Old system shutdown and removal (and termination of license agreements with the old vendor, as necessary, by Legal, Purchasing, and Accounting)<\/li>\n<li>Periodic internal progress meetings<\/li>\n<li>Periodic meetings with your Customer Success\/Account Management team<\/li>\n<\/ul>\n<p>Again, there was a terrific investment in time, people, and money to bring your solution aboard, similar to staging an expedition into the Himalayas. It was an enormous effort, including numerous side trips, solving problems with supplies and provisions, unanticipated challenges, injuries, and other difficulties. Most customers <em>really<\/em> don\u2019t want to go through that effort again, particularly in the short term!<\/p>\n<p>&nbsp;<\/p>\n<h2>Leveraging This Investment<\/h2>\n<p>Once your solution is in production use, the appetite for your customer to repeat these experiences is typically very low. Reinforce and leverage this! During renewal and expansion discussions, remind your customer that all of these steps are <em>already done<\/em> (and don\u2019t have to be duplicated, as would be the case for a new vendor).<\/p>\n<p>Your customer doesn\u2019t have to climb that mountain again; they don\u2019t have to face freezing winds and oxygen deprivation (in the form of excruciating presentations, demos, and other vendor activities). They can enjoy the rewards of that journey without reexperiencing the pain!<\/p>\n<p>Furthermore, any competitor that tries to displace you hasn\u2019t even defined a <em>plan<\/em> for their proposed expedition, as far as your customer is concerned. You are in a competitively advantageous position.<\/p>\n<p>&nbsp;<\/p>\n<h2>Important Caveats<\/h2>\n<p>However, here are very important assumptions for the above to remain true:<\/p>\n<ol>\n<li>Your customer achieved their Value Realization Events and is tracking well on the path to full ROI or has already achieved it (see page 110 in the paperback version of <a href=\"https:\/\/www.amazon.com\/Doing-Discovery-Important-Enablement-Processes\/dp\/B0B8RJK4C2\/ref=sr_1_1?crid=1U8XAZMG8HBYK&amp;keywords=doing+discovery&amp;qid=1659904849&amp;s=books&amp;sprefix=doing+discovery%2Cstripbooks%2C216&amp;sr=1-1\" target=\"_blank\" rel=\"noopener\"><em>Doing Discovery<\/em><\/a> for more on Value Realization Events).<\/li>\n<li>You have regular meetings with your customer via your account management and\/or customer success teams, so you are aware of any issues your customer is facing with your product or implementation (and have concrete plans to address them).<\/li>\n<li>You regularly discuss product roadmaps with your customers to head off competitors\u2019 \u201cnew and improved\u201d offerings and capabilities. Your objective is to stay \u201cahead\u201d of the competition, with respect to functionality, or to minimize any perceived negative functionality gap between your offering and competitors\u2019.<\/li>\n<\/ol>\n<p>Roadmap discussions are also opportunities to bind your customers more closely to you, by giving them more \u201cweight\u201d in the feature\/function definition, prioritization, timing, and implementation processes. Interactions with colleague companies at users\u2019 group meetings help reinforce this.<\/p>\n<p>In our expedition analogy, this last item is similar to discussing <em>future<\/em> excursions, encouraging your customer to participate in decisions about desired destinations, routing, daily travel distances, food and beverage choices, and sleeping arrangements. They enjoy a growing amount of ownership in the process and the results.<\/p>\n<p>&nbsp;<\/p>\n<h2>Change? No Thank You\u2026!<\/h2>\n<p>Fundamentally, most people don\u2019t want to change.<\/p>\n<p>Let me say that again: Generally speaking, people don\u2019t want to change. Even if they don\u2019t like their current state, they will preferentially stay with their current situation rather than take on the tasks above.<\/p>\n<p>They would rather stay with \u201cthe hell that they know\u201d rather than seek a solution. Oh, they\u2019ll whine about their current condition; they\u2019ll talk for hours about how much they don\u2019t like it. But if the problem isn\u2019t <a href=\"https:\/\/greatdemo.com\/uncovering-critical-business-issues-what-why-and-how\/\">big enough<\/a> or the solution isn\u2019t sufficiently compelling, then most people will stay with what they have.<\/p>\n<p>Want proof? In the world of software sales, one of the biggest \u201ccompetitors\u201d is No Decision, where the customer chooses to <em>do nothing<\/em>. On average, 43% of all forecasted opportunities end up as No Decision outcomes. (See this <a href=\"https:\/\/go.forrester.com\/blogs\/13-10-19-your_new_1_competitor\/\" target=\"_blank\" rel=\"noopener\">Forrester study<\/a> and this <a href=\"https:\/\/now.iseeit.com\/why-buyers-have-lost-the-ability-to-reach-decisions\/\" target=\"_blank\" rel=\"noopener\">article<\/a> for more data.) Fascinatingly, some of the people who are most resistant to change are\u2026 wait for it\u2026 <em>salespeople<\/em>!<\/p>\n<p>Why do No Decision results happen so frequently? Because making a business decision on major software selection is expensive, as described above, and it involves substantial risk as I\u2019ll outline next.<\/p>\n<p>&nbsp;<\/p>\n<h2>Risk<\/h2>\n<p>There is risk associated with anything new. As consumers, we tend to repeat purchasing from vendors who deliver sufficiently on their goods, expected capabilities, and associated promises. Why take the risk of trying another vendor?<\/p>\n<p>It is only when we have a <em>bad<\/em> experience that we consider changing (and many people <em>still<\/em> won\u2019t change \u2013 it\u2019s the hell that they know!).<\/p>\n<p>A similar situation exists in business with software purchases. If you have had a good experience with one vendor, you\u2019ll preferentially return to that vendor for other offerings or more licenses (upsell and expansion), because the perceived risk is lower. This is true even if a competitor\u2019s offering appears to be \u201cbetter\u201d.<\/p>\n<p>Example? For a period of about 1000 years (plus or minus a few), there was a famous expression, \u201cNo one ever got fired for buying IBM\u2026\u201d It is much less risky to stay with the current, well-characterized vendor and their products than to move to a new, unknown provider.<\/p>\n<p>Why would you engage a new, untested expedition company when you know and are comfortable with how your current guide-company performs? Why take the risk?<\/p>\n<p>As the incumbent vendor, you can take advantage of this risk by calling it out, when appropriate. If your customer begins to explore alternative vendors, gently (but firmly) remind them that you are a known quantity, whereas other vendors represent significant, unquantified risks!<\/p>\n<p>&nbsp;<\/p>\n<h2>Burn Victims \u2013 Fear and Loathing of Risk Unrewarded<\/h2>\n<p>There is great risk in change, often accompanied by fear and loathing. And for good reason!<\/p>\n<p>Have you ever seen a software implementation effort fail? Have you ever met a customer who was unable to gain the desired value from the \u201csolution\u201d they purchased? Have you ever encountered someone who had to roll back to a previous state?<\/p>\n<p>People in business who have suffered these fates are known as \u201cburn victims\u201d. They may be angry about being burned, and they will be hard to convince to pursue the same or a similar route again! (You can find more details on working with burn victims starting on page 298 in the paperback version of <a href=\"https:\/\/www.amazon.com\/Doing-Discovery-Important-Enablement-Processes\/dp\/B0B8RJK4C2\/ref=sr_1_1?crid=1U8XAZMG8HBYK&amp;keywords=doing+discovery&amp;qid=1659904849&amp;s=books&amp;sprefix=doing+discovery%2Cstripbooks%2C216&amp;sr=1-1\" target=\"_blank\" rel=\"noopener\"><em>Doing Discovery<\/em><\/a>.)<\/p>\n<p>This would be like paying for and participating in intense preparation for a major expedition only to find that the guide-company failed to provide proper provisions, requiring you to turn back without even glimpsing the summit! All that time and energy invested \u2013 for nothing.<\/p>\n<p>Opportunity cost is also an issue. A customer who decides to change from their current state will consume the resources described previously, including time, people, money, and political capital. What <em>else<\/em> could they have used those resources for, instead? Perhaps a more profitable expedition could have been launched in its place.<\/p>\n<p>This is also painful for customers who go through the entire evaluation process only to decide to do nothing (the No Decision outcome). Very expensive! (\u201cWe spent months preparing for the expedition, but then called it off at the last minute\u2026\u201d)<\/p>\n<p>Accordingly, customers who were previously burn victims (with other vendors) who are now enjoying success with you will be predisposed to buy more from you than risk pursuing another vendor. You can leverage this experience in your renewal and expansion discussions, and in fending off competitors\u2019 advances.<\/p>\n<p>&nbsp;<\/p>\n<h2>Relationships<\/h2>\n<p>Social capital is another area of advantage for the incumbent vendor. As the entrenched vendor, you have undoubtedly established and grown relationships with important customer players, including champions, management, key users, system admins, etc., as well as built relationships with Purchasing, Legal, Accounting, IT, Data Privacy, Security, and other departments.<\/p>\n<p>You\u2019ve developed good working relationships. Vendor and customer teams have established comfortable processes for communication and interaction that are now familiar to both parties. Your implementation team and your customer\u2019s team have shared and overcome the challenges they faced, together, and your customer success folks have developed rapport with key users and managers.<\/p>\n<p>This is valuable social capital that you\u2019ve established, in contrast with your competition who would have to develop these assets separately. And while the competition\u2019s salespeople might be known by your customers, they have not earned the trust and credibility that you have generated through a successful implementation process and resulting realization of value.<\/p>\n<p>You are the proven vendor! Reinforce this when competitors loom and when you discuss renewals, expansion, and other sales opportunities.<\/p>\n<p>When you have successfully completed a difficult, but satisfying mountain climb with one expedition company, wouldn\u2019t you prefer to work with that same organization when contemplating a new adventure? They know your food tastes, your preferences, your stamina level, and your allergies; they\u2019ve laughed at your jokes and listened in appreciation to your travel stories. It\u2019s a comfortable relationship!<\/p>\n<p>&nbsp;<\/p>\n<h2>Users\u2019 Groups Are Competitive Weapons<\/h2>\n<p>Users\u2019 Groups are like biological organisms: They want to grow and succeed. Each new customer who joins an active users\u2019 community makes that community stronger and increases its collective knowledge. This is another set of important relationships and social capital!<\/p>\n<p>Customers talk with other customers, sharing success stories and solutions, as well as roadmap preferences and new functionality requests. There is great comfort and safety in a community, along with a feeling of greater leverage with the vendor when the group as a whole agrees on a position.<\/p>\n<p>In addition to user-user interactions, Users\u2019 Group meetings also represent opportunities for you as a vendor to establish and develop deeper relationships with your customers. Customers expect to meet with sales and presales people during their buying processes, and with customer success folks during implementation, rollout, and beyond. However, Users\u2019 Group meetings provide opportunities for additional vendor teams and players to connect with customers, potentially including management, developers, product and marketing players, customer support, and other teams. These relationships increase your social capital \u201cbank account,\u201d generating more reasons to resist change.<\/p>\n<p>I encourage early-stage companies to establish Users\u2019 Groups as early as possible, even when there are only a dozen customers. And if you are a more mature vendor without a Users\u2019 Group, you should start one right away, and encourage every existing and new customer to join!<\/p>\n<p>In our expedition analogy, this would be like the vendor hosting regular post-expedition gatherings, with the clients sharing their experiences and stories with one another. Participants will not only reinforce their positive experiences (as well as push the vendor for improvements), but they\u2019ll learn about new, intriguing destinations, often selling one another on these opportunities <em>much<\/em> more effectively than the vendor can. That\u2019s <em>very<\/em> powerful reference selling\u2026!<\/p>\n<p>&nbsp;<\/p>\n<h2>Leverage<\/h2>\n<p>The incumbent vendor enjoys huge advantages that should be leveraged when exploring renewals, expansion, upselling, and in defense against competitors. Remind your customers of the investment they made in evaluating offerings prior to the sale. Recall the substantial effort now realized in implementation. Review the relationships \u2013 the social capital \u2013 developed, now in place, and operating smoothly. Recall the pain of change and the associated risks.<\/p>\n<p>Build on this foundation to secure renewals, drive expansion sales, and when introducing new products and solutions. It is much easier for the incumbent vendor with a successful track record <em>within <\/em>a customer to introduce and pursue these possibilities vs starting from zero.<\/p>\n<p>Presenting your mutual history in a timeline, as a slide or whiteboard exercise, can be a very effective way to gently (but firmly!) recall this information and reinforce your relationship. It is also a great way to bring your customers\u2019 new players up to speed with the activities completed to date.<\/p>\n<p>Competitors without comparable history suffer from severe disadvantages, which are the inverse of the incumbent\u2019s strengths. A customer\u2019s positive personal experiences with the incumbent build an imposing barrier against vendors without first-hand proof of success.<\/p>\n<p>When your competition talks about how much better their offering is than yours and introduces new, tempting capabilities, reinforce the investment your customer has already made, the value they are receiving, and the objectives they have achieved. Emphasize your customer\u2019s emotional desire to avoid change, the comfort and safety of the status quo, and the avoidance of unnecessary risk.<\/p>\n<p>With a successful implementation in production use and the customer enjoying the value gained, the incumbent vendor is perfectly positioned to secure renewals, drive expansion, and acquire additional business. And regarding our expedition, what is your next desired destination?<\/p>\n<p>&nbsp;<\/p>\n<p>Hmmmm \u2013 one additional thought: How many of you would now like to see a follow-on article on \u201cBattling and Overcoming the Incumbent Vendor\u201d?<\/p>\n<hr \/>\n<p>Copyright \u00a9 2020-2023 The Second Derivative \u2013 All Rights Reserved.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Advantages of the Incumbent Vendor Leveraging Its Impact on Managing Competition, Renewals and Expansion Sales (A Never Stop Learning! Article) &nbsp; \u201cGet their<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[8,14,11,15,20],"tags":[6,7],"class_list":["post-32948","post","type-post","status-publish","format-standard","hentry","category-great-demo-blog","category-advanced_topics","category-beyond_demos","category-customer_success","category-doing_discovery","tag-articles","tag-blog"],"acf":[],"_links":{"self":[{"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/posts\/32948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/comments?post=32948"}],"version-history":[{"count":2,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/posts\/32948\/revisions"}],"predecessor-version":[{"id":33655,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/posts\/32948\/revisions\/33655"}],"wp:attachment":[{"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/media?parent=32948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/categories?post=32948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/greatdemo.com\/wp-json\/wp\/v2\/tags?post=32948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}