It’s equally tough to move up the customer pyramid as down it.
Let’s say you are selling big-dollar, big-value enterprise solutions and have a desire to penetrate the smaller, long-tail, entry-level of your market. You’ll encounter challenges like:
- your own heavy-weight processes (and related dependence on current pricing margins)
- a stigma with small buyers that you are an overpriced heavy solution that isn’t right for their needs
- the potential to cannibalize your own sales
Akamai Technologies has done extremely well by selling to enterprise customers. But I lament that they never seized the opportunity to enter the self-service CDN and cloud-computing space. They missed the chance to own that space before S3 and EC2 were even glimmers in the eye of Amazon.
On the other hand, let’s say that you have products designed for easy consumption, low-prices, no long-term contracts, and you want to move into the higher end of the market with big deals and big dollars. You’ll be stuck:
- trying to shed a reputation that your products and services are low-grade “toys”
- building out a whole new kind of sales organization to court different customers
- fighting against competitors whose value is in their brand and relationships, not purely in the value of their offerings
Linksys would have had an awfully tough time selling datacenter network solutions into big clients unless they’d been bought by Cisco in 2003, a great example of where an acquisition was the only way either company was going to be able to move to the other end of the customer pyramid.