How to Sell Online Backup (part 1)
The Online Backup business is booming. Independent Service Providers like most of us are benefiting from a rising tide of public awareness in Online Backup as an inexpensive and better alternative to tapes and CDs.
The Online Backup Guide for Service Providers is a complete 196-page guide on starting and operating an Online Backup Service – the latest revision of Rob Cosgrove’s industry defining RBS Book originally published in 1987. The entire book is being published here, chapter by chapter.
A few well known large Service Providers are spending millions on advertising. Far from hurting independent Online Backup services, these big $5/month services are actually helping us.
Coca Colaâ„¢ is the world’s most recognized and valuable brand. You’ve seen their commercials on TV and their ads on radio and in print. The 124 year old company makes $5 billion per year in profits. This is up significantly from their first year, which showed a $20 loss on $50 annual sales from an average of 9 servings a day at Jacob’s Pharmacy in Atlanta, GA in 1886.
Within the next few years there were hundreds of competitors, including Pepsi Colaâ„¢, which started out as “Brad’s Drink” in 1893 at Caleb Bradham’s soda fountain in New Bern, NC. Today there are hundreds of thousands of competitors.
Various studies have shown that when high profile brands like Coca Cola and Pepsi launch big advertising campaigns, sales of competitive products in the same sector also increase as a result.
And this brings me around (finally) to my point. Like the soft drink business, the Online Backup business has a lot of players. Only two of them are spending a substantial amount of money on advertising.
Carboniteâ„¢ spends a million dollars a month. Nobody outside EMC knows how much Mozyâ„¢ spends, but I assume it’s at least half as much as Carbonite. So, here we have $1.5M a month being spent to raise public awareness about Online Backup, by companies whose solutions are capable of addressing only a percentage, maybe 30%, of the market.
This leaves the other 70% still looking for a solution for their servers, Exchange, SQL Server, in-person consulting, versioning, high security, and all the other things that high-end service providers can offer with Remote Backup Systemsâ€˜ products, and Mozy and Carbonite cannot.
It’s probably too simple to say that they are spending 70% of their ad budget ($1.05M a month) advertising for you, but it fits nicely in this spot. I will leave it here.
The Online Backup industry was one of the very few that thrived during the recession, and perhaps in part, because of it. As IT budgets were cut, companies were looking for cheaper alternatives to buying large drive arrays, building out data centers, and doing backups themselves. In many cases, it was cheaper to simply outsource their backups.
Add this to all the media buzz about “cloud” storage, the millions being spent on advertising by two vendors, and the underlying upswing in the business simply because “our time has come,” and you get a rising tide that lifts all of us.
I am seeing a dramatic increase in the number of sales for additional client seats. This indicates that our service providers are attracting more business.
Carbonite has been able to raise $67M in venture capital in the past four years from smart people who are willing to bet a fortune on Online Backup.
A spokesperson for EMC (Mozy’s parent company) said that while EMC cut 2,400 jobs in 2009, the Mozy division added employees.
I’ve spoken to dozens of RBS service providers who see the same signs as I do, and are gearing up for more business – buying more bandwidth and hardware, adding employees, and buying more client seats.
It’s a good time to be in the Online Backup business, and it will only get better.
The easiest sales are to existing clients – they already know and trust you. The second easiest sales are referrals from the first group.
Persuading a client to buy any new technology or service can be difficult. Those who are first, before the service is commonly accepted, must usually have a trust relationship with the service provider. Luckily, the big Online Backup services have done a great job of advertising for us. Most computer users already know about Online Backup.
This is why past and present clients, referrals, relatives, friends and neighbors are much easier to sign up. They already know you and have a reason to trust your judgment. Unfortunately, this is a limited group and may not allow growth to the critical point of profitability.
It is common for Online Backup Services to offer trial accounts (which both RBackup and Mercury support), or money back guarantees.
For a sale to occur in professional services, the prospect must:
- realize the need,
- believe the service will help address the need,
- trust the service provider to deliver the help, and
- feel the need to hurry up a commitment ahead of other items on his/her agenda.
Usually, the first objection that comes up from potential clients is: How secure is my data? Can you or anyone else access it?
The answer is, “No. RBackup and Mercury software encrypt the client’s data before it is transferred to the server, and it is stored in its encrypted state.” That seems to be a satisfactory answer for most.
When a lawyer asked how secure the encryption was, and received the reply that the encryption was secure enough to protect the Service Provider from being sued, he signed up for the service.
What do the Successful Service Providers Do?
Just about anyone can sell Online Backup. However, after years of watching thousands of them, I have a very good idea of what makes the most successful Service Providers.
They pitch once, sell many.
Any time you can make a sales pitch once and sell multiple clients, do it. The top grossing Service Providers all have this in common. Many of them form partnerships with other companies who have clients who might need Online Backup.
They have existing clients who trust them.
This group includes computer shops, network consultants, accountants, computer repair companies and others who have existing customers with a trust relationship involving their computers or data.
It is much easier to sell to existing customers than to create new ones. So, Service Providers who already have relationships with their target market reach profitability quicker and have better long term success.
Many Service Providers use Online Backup as a way to create new customers for other services. The customers of business Online Backup services are loyal. We have found that offering Online Backup makes them more “sticky,” less prone to move to another computer shop or CPA.
They have a contract with a distributer.
These Service Providers, similar to the first group, can access a pool of existing customers through one or more distributors. One Service Provider formed a partnership with a distributer who rented equipment to schools – MANY schools.
They signed a contract giving the distributer a percentage of sales. The distributer then promoted Online Backup to his clients. The result: 11,000 new Online Backup clients within four months.
They brand their software.
All the most successful Service Providers brand their Client software with their own company name, software name, and graphics. All RBackup software packages come with a customization and branding utility at no additional charge, even in the least expensive packages.
They have a niche market.
The flexibility and ease of branding the RBackup and Mercury software allow Service Providers to create customized client software for niche markets, which can be promoted through associations and trade groups.
For example, one Service Provider has branded several different versions of his Client software for different state associations of dentists. The associations approve and promote the software to their members and receive a percentage of sales.
They embed Online Backup software in other applications.
This is my favorite. I wish more people would do this. RBackup has a built-in ability to be embedded in other software, thereby adding an Online Backup capability to software that otherwise wouldn’t have it. Some Service Providers use this feature to partner with the developers of other kinds of software.
For example, one Service Provider partnered with a company that sells restaurant management software. He created a customized client that operated in “stealth” mode, and could be launched by a menu item in the other application.
His client software was embedded in the restaurant management software’s installer, so it is installed right along with that software. With RBackup operating in stealth mode, it never displays anything on screen. So, as far as the restaurants are concerned, their management software automatically backs up its own files online every night.
They have a crack sales team.
The technology is cool. However, it’s worthless unless you can sell it. The most successful Service Providers are good sales people. They spend more on hiring sales talent than they do on technical people.
Even if you don’t fall into one of these “most successful” categories, please realize that the industry is still in its infancy – still in flux. These categories will change with time and technology.
Part 2 of this chapter will be posted here on April 4.
Rob Cosgrove is the President of Remote Backup Systems, founder of the Online Backup Industry, and a vocal advocate for maintaining the highest standards in Online Backup software. His latest book, the Online Backup Guide for Service Providers: How to Start and Operate an Online Backup Service, is available online now, on Amazon.com, and at bookstores.
Remote Backup Systems provides brandable, scalable software and solutions to MSPs and VARs enabling them to offer Online Backup Services.