Why enterprise technology customers are not happy (and what to do about it)

Greater transparency and the rise of cloud services are among the changes giving end users more voice in technology buying decisions.

It’s not exactly a trade secret: Enterprise IT companies are not known for producing great customer experience. Their customer loyalty scores are low, down in a range with the health insurance industry. It’s not terribly inspiring.

But in spite of some poor customer ratings, many of the companies that sell software, services, and hardware have been able to thrive partly because they built strong relationships with their primary buyers: CIOs and other senior IT executives. They locked in long-term contracts with these buyers, who tend to have slightly higher opinions about the vendors and their products than the employees who use them.

But as the industry evolves towards software-as-a-service, cloud hosting, and other innovations, business executives and other users outside of IT are gaining a bigger voice in technology purchase decisions. A recent Bain & Company survey of the marketing, customer service and supply chain functions found that nearly a third of technology purchasing power has moved beyond IT to executives with responsibility for these functions.

To survive this shift, technology vendors will need to learn some new skills. They’ll need to improve the customer experience and get better at selling to executives outside of IT. For example, chief marketing officers and HR leaders, while maintaining strong ties with CIOs, who will still lead or have input to purchasing decisions in most companies.

The first skill they’ll want to improve is producing a better customer experience, which can raise customer loyalty. When we surveyed more than 5,000 technology decision makers and end users in US companies, we found a massive gap between their perceptions. In six of the eight hardware and software categories, end users gave a negative rating. That is, they were more likely not to recommend a given vendor than to recommend it. By contrast, scores for decision makers were negative for only one category.

Why the discrepancy? Tech vendors have too often overpromised to win the sale and then underdelivered. In our survey, end users cited frustrations with the availability and competence of customer support for hardware; for software, they complained of long and complex installations, poor integration and generally clunky functionality and interfaces.

When companies in other industries faced similar problems, they focused hard on understanding what matters most in delighting or frustrating their customers. Most vendors will need to invest in programs to improve customer loyalty, and many have their work cut out for them instilling a culture that focuses on customer experience. And of course they will need to tailor their customer loyalty programs to their strategic goals: A program aimed at boosting renewals might look different from one aimed at selling adjacent products.

Then there’s selling. The role of the CIO is changing, but that change varies from one organization to another. In some companies, CIOs will still lead the decision-making process, but they will also consider more input from the business and functional leaders. In other companies, CIOs will only provide input or may even be cut out from the decision process altogether.

Technology providers see this happening, but few are ahead of the game in figuring out how to respond. One mistake they make is assuming that the shift will occur uniformly across functions. However, in most companies sales and marketing executives appear to have more power in decisions about technology than their peers in, for example, the supply chain or customer service.

Another common mistake we see is telling sales teams just to extend their IT sales efforts to business buyers. This oversimplifies the complexity of the changes under way. Sales teams that have successfully sold to IT may lack the capabilities to sell to executives in other parts of the business. For example, a general manager planning an investment in a new digital business requires a different level of engagement than a chief marketing officer who is more likely to want to save money on fixed costs.

A related pitfall for sales teams is thinking they can easily adapt their traditional way of selling to their new buyers. In reality, these new customers look at technology differently than traditional buyers do. IT buyers are accustomed to evaluating a technology’s features and functionality, and their teams routinely do a lot of integration and customization work. Business buyers are more focused on outcomes, and they think about how long it will take for the technology to boost sales or reduce costs. Some tech vendors are reaching these buyers with new offers around free or low-cost trial periods, giving customers time to see and measure business results, and then reengaging to introduce broader offers.

We also found a relationship between customer advocacy and the likelihood of future sales. Our data showed that customers with the highest loyalty scores were two to three times more likely to want to renew their contracts and about twice as likely to buy other products from the same vendor, compared to customers with less favorable opinions. Those metrics should help motivate technology vendors to deliver a better customer experience for their enterprise customers.