Stories by Marta Steeman Business Day

Survey finds tech firms bubbling along

Technology companies continue to grow quite strongly despite the recession but fail to extract great value from their sales, according to a new survey.
The survey in late 2009 by Christchurch technology marketing company Concentrate and PricewaterhouseCoopers surveyed 144 companies, most of whom are small and many also exporting. They are in the electronic, software, telecommunications and associated services.
Just over half the companies had sales of less than $1 million a year, and another almost 30 per cent had sales between $1m and $4.9m. About 8 per cent had sales of $5m to $9.9m.
Over half of the companies were between five and 20 years old and 30 per cent were under five years old.
Overall the growth for the 144 was 39 per cent in 2009, down from 58 per cent in 2008, but still exceptional. The large growth was off low bases for some companies. Generally, the bigger companies with more than $10 million in revenue grew less percentage wise.
Most companies were selling deals and services in the $10,000 to $100,000 range when charging a one time fee.
When charging a monthly fee for services, about 30 per cent of sales were in the $1000 to $10,000 range. Only a tiny percentage – 2 per cent – were charging between $1m and $10m a month for services.
The companies tended to rely heavily on sales staff for their sales push rather than more overarching marketing programmes. Most of the technology companies were selling directly to customers rather than through a distributor.
"The study reveals brave Kiwi technology companies battling it out largely alone in tough world markets [and] growing sale by sale," the report says.
The companies said they positioned their products as premium in quality but attracted market or below market rates.
Investment in sales and marketing was high but was focused on the sales transaction.
The dominant marketing was the "door to door" approach where companies armed their sales staff with brochures and other promotional material and sent them out to "walk the streets" and secure contacts and sales in overseas markets. The sales person was left to do everything from introducing the company and overcoming objections to closing the sale.
The approach was expensive, reliant on quality staff, had long lead times and delivered lumpy revenue.
The report advocates a "moving the herd" approach which the highest achieving companies used. They used promotion to a tightly defined market with a compelling value proposition.
The approach resulted in sales activity building over time, with the cost of sales dropping, broader company involvement in sales, better engagement with distributors and could build scale without having a large sales force.
Most of the companies are selling to other businesses, though in Wellington sales tended to be more consumer and government-focused.
Almost 70 per cent of the companies had one or no marketing staff.