Battling the Mega Vendor: When TOTO isn't Your Best Friend.

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Unfortunately, we won’t be talking about cute and fluffy Toto here, who L. Frank Baum, the author of The Wonderful Wizard of Oz described as a “Little black dog with long silky hair and small black eyes that twinkled merrily on either side of his funny, wee nose."

As you can see, this dog has an attitude. He’s called TOTO, and he stands for Turn Off The Oxygen. I prefer it over the equally unpleasant previous term I used to use, Poison the Well. Turns out I’m a sucker for a pronounceable acronym, especially one that initially summons up the visual of a cute dog, and turns out to be just the opposite.

TOTO is a strategy used by vendors to disrupt their competition. It’s a strategy I’ve been on the receiving end of many times, and it’ll keep you up at night. And unless you’re proactive and just as aggressive in counteracting, it can turn a hot market that you pioneered, into one that’s oxygen – and revenue, free.

Simply it’s this: When an upstart is 100% focused on disrupting a market with a bold new offering that poses a threat to a larger more well-heeled mega-vendor, the mega-vendor responds by offering what is typically an inferior product at zero or very low cost. They make it a no brainer from a buyer perspective. And because 100% of the revenue stream of the upstart is dependent on this product, while the mega-vendor has many other sources of revenue to insulate themselves, the upstart has a deer in the headlights moment, employees flee the ship, they get acquired, or disappear into obscurity. They got TOTO'ed.

The classic example, of a somewhat anti-competitive and a little too overt TOTO, happened to Netscape in the nineties. By Microsoft simply including Internet Explorer free with Windows, Netscape’s business model ceased to make sense. Similar TOTO strategies are in-play today, with the likes of Box vs. OneDrive, and Tableau vs. PowerQuery/Power BI, and with many other segments/vendors.

When it Really Starts to Bite

So what’s it like to be on the receiving end of this kind of strategy for B2B vendors? And what sales and marketing techniques can you use to counteract? Let’s start with what happens when the strategy is in play:

  • Deal velocity slows. The mega-vendor has entered the market with a solution that on-paper is similar to your own at a fraction of the price. Your decision maker/champion/buyer begins evaluating the alternative, or IT becomes involved in the deal as mega-vendor looks to roll the solution into a broader agreement. It becomes hard for your champion to justify to his/her peers, why your solution, and not the mega-vendor's. Yes, your features are “cool” but are they perceived as really worth what you’re charging versus free/dirt-cheap?
  • Price points drop dramatically. Whether you win the deal or not, the mega-vendor has readjusted the market price point – in the wrong direction. All vendors in the space react, reducing their price points to compete. A new, unpleasant norm is set for the street price for your class of solution. The oxygen begins to dissipate for everyone.

  • Sales frustration and desperation kick in. Suddenly, sales tools and materials that were adequate don’t cut it anymore. They worked great when the value proposition was so obvious to communicate and for the buyer to understand. Sales cycles that were quick wins turn into losses and no-decisions. And finger pointing begins between sales, marketing and product organizations on what to do. Everyone scrambles for air.

You get it, having the oxygen turned off really does suck. The solution is a combination of sales, marketing, and product strategy. I can't solve product strategy in this post – that’s a longer discussion, and definitely part of the solution. But there are things you can do, right now.

5 Strategies That are Preferable to a Dog Whistle

So how can you combat TOTO especially when you are up against a mega-vendor (which is the typical scenario). And how can you do it fast? Because let's face it, when this strategy is in play, time is a luxury you don't have:

  • Be easy to do business with.  Your mega-vendor is likely still as big and slow moving on the sales side of things as they were on the product side of things. Your sales cycle is where you can showcase how easy it is for the prospect to do business with you, see the product, get hands on and get their questions answered. It’s where the prospect gets to realize the difference between being a customer of yours, versus a customer of the mega-vendor - and there's real value to that.

  • Equip your decision maker. If your decision maker isn’t equipped with the knowledge to communicate the value of your product to his peers and communicate why it is a premium product and better than free, then you’ve got a problem. Will your product have materially less training costs, if so by what percent? Do they have a much stronger chance of success with you, if so, how? Is the ongoing maintenance with your solution substantially less, why? Your job is to equip your champion to fight against fee, communicate why the value (and ergo the cost is higher), and why it will make them (and the company) more successful than the alternative.

  • Get the prospect hands on. Often the mega-vendor wants to wrap the whole product in a big Master-Sales-Agreement and route it through IT – not even go through a formal evaluation or decision process, and blindside the business decision makers. It's how you get an inferior product over the finish line. You need to make your business champion - and their peers, fanatical about your solution – get them hands on, get them trained and vested on your solution. If it's better, they have to feel it's superiority - and just doing it with PowerPoint slides won't cut it. Make your prospect confident that your solutions means less risk. And then communicate the future unknown costs of the mega-vendor's solution, versus the known costs of yours.

  • Change up your sales tools. When you’re up against TOTO, the old sales tools you used to use won’t necessarily be effective anymore. You have to re-evaluate everything – are your customer success stories speaking to your value over free? Do you have a real ROI comparison versus the alternative? Are your sales team ready to change up the sales cycle getting the prospect hands on to prove out the value? Are you putting updated messages in the hands of your buyers?

  • Really focus on why your different and turn it into value. It’s not just your mega-vendor competitor’s price point that is low - your competitors price points will drop also, as they react to the new disruptive entrant. It’s why you need to communicate not just your differentiation – but what it means in terms of current and future value, more clearly than before.

Of course, there are other strategies you can use, like going negative in the face of the strategy - but to be honest, positively communicating your value, and equipping your decision maker is a better road. Negativity is not a sustainable strategy.

Believe it or not, there are some benefits to TOTO. Because the fit of desperation from the mega- vendor typically means large globs of accompanying press and marketing spend, which often means more opportunity and a bigger market and overall space.

But it’s your job to keep the oxygen turned on, and take advantage of the bigger market to play in.