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Software Vendors Can’t Buy Customer Love

Posted in:  Highspot News, Sales Enablement Strategy

There have been a lot of mergers, acquisitions, and consolidation activity in the sales and marketing tech arena in recent months — and the noise is only expected to increase. This brings more risk and uncertainty for customers and potential buyers in the market for SaaS software. Why? Because nearly 90% of all acquisitions fail, and it’s often the customers — not the vendors —  that become innocent victims, left short-changed and holding the bill.

To avoid this, you first need to heed the warning signs of impending M&A activity:

  1. Software isn’t getting used. The biggest indicator your vendor is headed for failure is that you aren’t getting the usage or value you expected from your software. If so, it’s likely that you aren’t the only one. Great software is sticky because it gets used, and to get used, it has to be intuitive and valuable for the people using it.
  2. Innovation is promised but not delivered. Software vendors that over-invest in sales and marketing but don’t follow through in product innovation, engineering, and customer success will eventually fall behind on their promises. You may be expecting features that are talked about but not delivered or continually delayed quarter after quarter.
  3. Key staff and executive departures. How many account executives and support staff have you cycled through in the past few years? Are key people at your vendor’s company no longer there? If so, watch out. They’re probably not sticking around for a reason. Not only does the turnover create disruption for you, but it also means that the strategy and vision of your software vendor may be changing fast.

So let’s say that you read the tea leaves correctly and, lo and behold, your vendor announces it is acquiring another company — or, just as bad, it has been acquired by another company. Here, it helps to understand the reasons that most M&A initiatives fail.

The biggest reason might surprise you. It actually has to do with the acquiring company’s underlying motive. While there are some good reasons for making an acquisition — like complementary technology, market expansion, or talent and IP — the motivating factor that signals disaster more than any of these is when the acquiring company purchases a competitor. Here’s why:

  • Because the acquisition ISN’T motivated by the technology of the acquired company, you can expect it to soon be cut off from future innovation, support, and most likely be discontinued in the very near future.
  • Because the acquisition ISN’T motivated by people and talent, you guessed it — golden parachutes and severance packages come next. This, in turn, creates more than just churn for customers … it creates an internal morale maelstrom which results in an exodus of great talent on both sides as employees see that their smaller-company culture is lost forever.
  • Because the acquisition IS motivated by growing the customer base, you can also expect that that’s where the majority of future investment will go — toward acquiring new customers versus keeping existing customers happy. While the vendor will make promises about white-glove service, easy transitions, full parity and support, and even favorable pricing, at the end of the day, all resources will be focused on quick expansion versus building a product that customers love and value.

So what should you do if you find that your SaaS vendor is buying another company or being bought itself?

  • Check your contract language for outs. Go over your contract agreements and see if you have termination for convenience or a material change of control clause. This could be your best and fastest way to avoid pain.
  • Meet with the acquiring vendor as soon as possible. Whether you are using the acquirer’s product or the acquiree’s, don’t wait for the rest of the customer base to queue up before you get the answers you need and deserve.
  • Ask about service levels. Will your current service levels in your agreement change at any point in the remainder of your contract?
  • Ask about your key contacts. Will your account team, executive sponsor, customer service, or billing and technical support contacts change?
  • Demand to see the 18-month product roadmap. You can bet the vendor had a vision in mind for what they will do (or not do) for all products over the next 18 months. If they aren’t able to share it with you with 100% clarity, then they aren’t being transparent and it’s a signal of risks to come. Ask the same thing about the company’s vision, business model, pricing, and support plans.
  • Evaluate alternative vendors. To avoid being caught flat-footed and without any options or leverage, look for other best-in-class vendor alternatives to evaluate as a replacement. Because you are likely headed for some intensive resource drain and significant change management, the best option can often be found starting clean with a more focused vendor.

At the end of the day, a software vendor can buy customers, but they can’t buy customer love. At Highspot, we believe that the best way to a customer’s heart is to create delightful product experiences that drive valuable results for their business. Sign up for a demo today to experience Highspot for yourself!