The Value Chain & AIDA Process

in the Software Industry

Whitepaper from TBK Consult

Author
Hans Peter Bech, M.Sc. (econ)

 Hans Peter Bech 2014

First edition
Unless otherwise indicated, Hans Peter Bech copyrights all materials on these pages. All rights
reserved. No part of these pages, either text or image may be used for any purpose other than
personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission,
in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal
use, is strictly prohibited without prior written permission.
Published by TBK Publishing (a division of TBK Consult Holding ApS)
Denmark
CVR: DK31935741
www.tbkpublishing.com
ISBN: 978-87-93116-07-8

The Value Chain & AIDA Process in the Software Industry

Table of contents:

Targeted audience

Abstract

Author

Acknowledgements

What are sales?

The challenge of the indirect channel approach

The AIDA process

Awareness
Interest
Desire
Action

The value chain

7
8
9
9
10

10

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The AIDA process, the Value Chain and the independent channel partners 12

Conclusion

13

About the author

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The Value Chain & AIDA Process in the Software Industry

Targeted audience

The target audience for this whitepaper is the board of directors,

the CEO and the sales and marketing executives of software
driven companies1 with ambitions for achieving global market
leadership through a channel of independent business partners.
The whitepaper primarily addresses the challenges of software
companies with long value chains requiring sales people to
engage with B2B customers.

Abstract

This whitepaper discuss the best approach for making and

keeping independent channel partners in the software industry
productive.
The whitepaper uses the business model framework and defines
the purchase process (AIDA) of our ideal customers and explains
how we must design our Value Chain to accommodate this
purchase process.
The whitepaper argues that the sales process in reality is the
facilitation of the customers' purchase process. A large portion of
the sales process can be predicted and prepared for, reducing the
sales effort and associated cost-of-sales as well as increasing the
probability of winning the business.
Finally the whitepaper explains how software companies can
identify and define the AIDA and corresponding value chain
processes.

Author

Hans Peter Bech

Acknowledgements

Design and lay-out: Flier Disainistuudio, Tallinn, Estonia, www.

flier.ee

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Proof reading: Emma Crabtree, ecr@tbkconsult.com

Independent Software Vendors (ISVs)

The Value Chain & AIDA Process in the Software Industry

What are sales?

This whitepaper is about how to sell2 our software through

independent channel partners.
We all know that selling is difficult. Making software products is
not the big challenge. Making software products that customers
really want and are prepared to pay for is the big challenge.
Only very few (if any) software products are pulled off the shelf
by customers standing in line with their credit cards and cheque
books ready.
We have to make it past the tipping point before the market
dynamics begin working in our favour generating a pull all by
itself. The tipping point is typically around 20% market share.
Until we have passed this point we need to push and push and
push.
When the project involving our software is of a certain size
and several people are making the purchase decision, then we
need to employ sales people to help the customers. That applies
irrespective of whether the potential customers have found us or
we have found them.
Approaching the market through independent channel partners
makes no significant change to how customers purchase software
products or solutions. They still need to make absolutely sure
that they make the right decisions for their businesses. Such
decisions are about picking the right investments and selecting
the most appropriate vendors for those investments.
At TBK Consult we define sales as facilitating a purchase
process. Sales should not be wizardry or magic exercised by
prima donnas. We must be able to repeat and scale our business
processes and especially our sales processes, thus we must
define, document, follow and improve them.
The first step in applying this philosophy is learning and
understanding why and how our customers purchase our type
of software and solutions. Then we need to understand when and
why the customers choose us over our competitors.

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That insight is crucial irrespective of whether we are selling

directly or through independent channel partners.

Find, win, make, keep and grow happy customers

The Value Chain & AIDA Process in the Software Industry

word channel is traditionally used in the software industry

Selling through The
to describe independent companies that assume various roles
and obligations in bringing a software product to the customers.
independent
definition is rather broad, since the roles and obligations can
channel partners The
vary substantially from simple reselling to system integration,
solution development on top of the software, implementation in
terms of consulting, project management, customization, training
and support.

Figure 1: Osterwalder's
business model framework

This definition collides somewhat with the contemporary

business model framework definitions3. In the business model
context the channel is the way we get to our customers. The
role of the channel is to take our brand to the customers4. Thus, a
company can operate the channel directly with his own resources
or he can assign independent companies to operate some or all of
the activities in his value chain5. However, our channel choices
have a fundamental impact on all the other building blocks in
the business model6.
This whitepaper deals exclusively with the process of selling our
products through independent channel business partners, which
operate in their own name and at their own risk and cost. It is
assumed that these channel partners are supposed to find, win,
make, keep and grow happy customers for the software vendors
product(s).
Introduced by Alexander Osterwalder in 2010 through his book
Business Model Generation. http://www.businessmodelgeneration.
com

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Thus, OEM and white labeling operations are not considered a

channel, but rather market segments in their own right.
4

Please see The value chain on page 9

Please see the whitepaper The Software Partner Channel in a
Business Model Context TBK-WIPA-009
5

The Value Chain & AIDA Process in the Software Industry

As you can see in the business model illustration in figure 1

there are two building blocks connecting our customer value
propositions with our customers. The Channel building block
represents the different routes we can choose (direct, resellers,
value added resellers, distributors, value added distributors,
implementation partners etc.)7. The Customer Relationship
building block represents how we find, win, make, keep and grow
happy customers. This whitepaper deals with the Customer
Relationships building block and the impact on the other
building blocks.

The challenge
of the indirect
channel
approach

Using a channel of independent companies to sell, implement

and/or service your customers has a long tradition in the history
of the software industry. For some software companies the
channel has been a major contributor to global success, but for
most software companies making it work is a constant struggle.
When software vendors have been successful in selling their
products directly to customers, why do they then fail to repeat
this success through a channel of independent business
partners?
The failure of an indirect channel can normally be traced back
to the lack of quality in the channel recruitment activities and
in the elements of the channel partner program of the software
vendor. We hope this whitepaper will help software companies
design their channel partner program8 to address the issues
associated with finding, winning, making, keeping and growing
happy customers.

www.tbkconsult.com

The AIDA process

The AIDA acronym stands for Awareness, Interest, Desire and

Action. Elias St. Elmo Lewis9 who operated an advertising agency
in the USA coined the AIDA concept at the beginning of the last
century. Elmo Lewis helped his clients with advertisements and
was obviously passionate about finding the best ways to create
Awareness, motivate Interest, grow Desire and spur Action.
7

Please see the whitepaper Commonly Used Definitions in the

Software Industry Front Office TBK-WIPA-014

8

Please see the whitepaper Designing Effective Channel Partner

Programs in the Software Industry. TBK.WIPA-012

9

Please see the whitepaper Designing Effective Channel Partner

Programs in the Software Industry. TBK.WIPA-012

The Value Chain & AIDA Process in the Software Industry

In the context of this whitepaper the AIDA process represents

the main generic steps our potential customers go through on
the route to become our customers.
In recent years the term Customer Journey has proliferated
primarily in web based business models. It is basically the
same thing. The Customer Journey approach is to map all
the potential touch points we have with our customers and how
to most effectively engage with them in each touch point with
the objective of finding, winning, making, keeping and growing
happy customers.

Awareness

I know who you are.

Potential customers must know that we exist. They must
associate us with something specific and relevant to their
business domain even though they may not want what we have
to offer just now.
Without awareness nothing can happen.
Neither our independent channel partners nor we can sell
anything to potential customers that do not know that we exist.
Since Elmo Lewis coined the AIDA term a hundred years ago
much has happened. In the context of creating awareness the
media landscape has changed completely especially since the
introduction of the Internet in the early 1990s. Despite the
growth in communication channels, creating awareness with our
target customers is no easier today than it was a hundred years
ago. With all the opportunities available and the incredible noise
on all communication channels creating awareness remains an
art and science in itself.

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Sean Ellis introduced the term growth hacking a few years ago
10
indicating the need for being three steps ahead of the general
market in using the Internet and social media for generating
exposure and business without a million dollar marketing
budget.
It is beyond the scope of this whitepaper to go through all the
options for creating awareness, but if neither our independent
channel partners nor we have millions of dollars available for

The Value Chain & AIDA Process in the Software Industry

awareness building it certainly makes sense to engage a growth

hacker that can help us find effective ways to create that first
awareness.
Please note that making a phone call to a potential customer
is also awareness building. It is probably the most expensive
awareness building activity you can undertake, but in some
situations it may still be the most cost effective.

Interest

Now that I know who you are and what you do, then
I am interested in learning more.
This whitepaper deals with software products that require sales
people to engage with companies. During our efforts in building
awareness we will hit potential customers at all stages of their
purchase process and most of them will not even be actively
looking for what we have to offer. Stimulating their Interest and
thus meeting their needs for information will require a portfolio
of fulfilment vehicles11.
If we have defined our target market well we can anticipate which
kind of information and in which format the potential customers
need this information. When sales situations are complex (more
than one decision maker) we need to provide information that is
relevant for the buying role as well as for the purchase process.
E.g. customers without an active need will be more interested in
reading case stories about how other customers have benefitted
from our products and services than technical whitepapers
explaining product details.

Desire

We have a project, we have the budget and we want

to do this.
Getting from Interest to Desire is a step thoroughly discussed
in the sales literature. Can we activate the Desire or do we have
to monitor the potential customers until the day the Desire is
activated from within?

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In some cases we can actually activate the Desire while in other

Whitepapers, case stories, product information, fact sheets, conference
papers, blog posts etc.

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The Value Chain & AIDA Process in the Software Industry

situations we have to stand-by waiting12 for the release of the

Request for Proposal.
Whatever the situation we have to consider how we can ensure
that we nurture the process most effectively ensuring that we are
selected when the day of Action comes. We can anticipate these
processes and prepare materials and activities to stimulate and
influence the journey from Interest to Desire.

Action

We have issued a PO for the project.

Purchase decisions come in many shapes and forms, but this
is the moment we have been working towards. The Purchase
Order, the contract or whatever forms it may take.
The bigger the sale the more likely it will be to be broken down
into smaller phases or have escape clauses. Big-ticket sales are
often a series of small ticket sales involving numerous activities
and tests on the way. We can anticipate these steps as well and
prepare for most of the situations. The better prepared we are
the more likely can we impact the purchase process itself and
steer the deal in our direction.

The value chain

Michael Porter introduced the term Value Chain in 197913. As

the value chains in the software industry are much simpler
than those of other industries TBK Consult has adjusted the
concept to include more details on the marketing, sales and
implementation processes, which tend to be much more
complicated than in most other industries.
A sample software industry value chain is illustrated in figure 2.

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Software companies have a huge advantage over their customers.

While software companies are engaged in sales projects on a
daily basis their customers are engaged in the equivalent
purchase projects much less frequently. How often does a
company purchase a new ERP, a new warehouse management
or HR system? Not very often.
We will work hard building our relationships and work on driving the
content of the RFP in a direction matching our product and strengths.
13
Porter, Michael E. (1979). "How competitive forces shape strategy,"
Harvard Business Review.
12

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The Value Chain & AIDA Process in the Software Industry

Figure 2: Sample software industry value chain

The software companies have a unique opportunity for optimizing

the sales process including:
xx

Fine tuning their ideal customer profiles (vetting out

those potential customers that will not make a purchase
decision or will most likely chose another vendor)

xx

Identify and optimize the most productive ways of creating

awareness (generate leads)

xx

Developing the tools to satisfy interested potential

customers (convert leads to active potential customers)

xx

Structure and facilitate the purchase projects helping the

clients through their decision making processes (convert
active potential customers to real customers)

xx

Managing the implementation projects ensuring deliveries

are made on time, budget and quality (converting customers
to happy customers that can serve as references for us)

xx

Organizing account management to keep and grow

current customers (maximize customer lifetime value)

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We must define a sales process that is the best possible

facilitation of the purchase processes that is being executed by
our ideal customers. Only this way can we establish a common
vocabulary, design actions and tools to be applied in the various
stages, have meaningful conversations about the status of the
pipeline and produce reliable forecasts.
Selling is a process just as any other business process. It is
severely impacted by external forces, but that doesnt mean
that we shouldnt treat selling like any other business process.
Understand it, document it, teach it and optimize it.

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The Value Chain & AIDA Process in the Software Industry

The AIDA
process, the
Value Chain and
the independent
channel
partners

Do we want to leave these issues and challenges to the

independent channel partners? Do we as a software company
prefer to focus on SPM14 only?
Even Microsoft, SAP, IBM, Oracle and all the other huge
software companies dare not leave the AIDA process and the
value chain completely to their independent channel partners 15.
All software companies go through three main stages in their
growth to market leadership.
Bootstrapping -> Bridgehead -> Scaling

When we are in market bootstrapping at the foot of the growth

curve with no brand awareness and no genuine traction in the
market we must stand side by side with our independent channel
partners learning from what happens in the field. We must help
our partners win deals and increase the productivity of their
value chains. If we cannot make our partners successful we will
not become successful. Leaving sales to the independent channel
partners is an approach doomed to failure if our ambition is to
make it past the tipping point before our competitors.
When we have established our bridgeheads in the various
markets we will also have built a repository of best practices
that we can share with new partners, while we continue to work
with our best performing partners on improving the processes
even further. We will be more selective on where we allocate field
sales resources, but we will never pull back completely.

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In the scaling stage (that never ends) we will still work with
selected partners expanding and consolidating our market
positions16.

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The Value Chain & AIDA Process in the Software Industry

Conclusion

Although we may engage independent channel partners to

assume responsibility for finding, winning, making, keeping
and growing happy customers for our software products, we
still have to remain on top of the sales process. We must stand
side by side with our new independent channel partners in the
field closing their first deals and kick starting their business
with our products. We must continue to work with our partners
understanding the changes in the business environment and
continue the optimization of the sales process reducing both the
length of the sales cycles as well as the cost of sales ratios.

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Only with successful partners will we be successful.

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The Value Chain & AIDA Process in the Software Industry

About the author

Hans Peter Bech has been developing and managing global
partner channels in the software industry for more than 30
years.
Hans Peter built the partner channels for companies such as
Dataco (now Intel), Mercante, Dansk Data Elektronik (now
CSC), RE Technology (now Barco), and Damgaard/Navision (now
Microsoft).
As a management consultant Hans Peter has been providing
consulting on channel development and management issues
to companies such as Microsoft, Danfoss, Proekspert, Jeeves
Information Systems, eMailSignature, SoftScan (now Symatec),
Netop, EG A/S, CSC Scandihealth and Secunia.
Hans Peter is the author of several whitepapers on channel
development and management and he frequently writes articles
on the subject.
He started his career as a management consultant in 2003
and founded TBK Consult in 2007. Since then he has built the
company to its present position with 24 senior consultants in 16
countries.
Hans Peter oversees the development of TBK Consult as well
as performing management consulting assignments for selected
clients.
Hans Peter holds a M.Sc. in macroeconomics and political science
from the University of Copenhagen. He speaks Danish, English
and German and is a certified ValuePerform, ValuePartner and
Business Model Generation consultant

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More about Hans Peter Bech

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TBK-WIPA-016