July 2010

"If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success."

John D. Rockefeller

This article discusses the unique challenges commercial open source companies face in bringing their products and services to market. It recommends an overhaul of traditional software vendor market approaches in favour of a volume market strategy and identifies the core technology, content, and best practice methodologies of that strategy.

The article is organized into five sections. The first section discusses the nature of open source customer relationships. It explains why the traditional sales funnel metrics do not apply in a commercial open source context. The second section introduces the concept of "progressive engagement" and discusses the lifecycle of open source relationships. The third section, multi-channel demand generation, identifies techniques for improving lead flow and quality by incorporating traditional lead sourcing techniques into the volume market model. The fourth section makes the case for marketing automation software and discusses some of the critical elements of an automated marketing infrastructure. The fifth section covers high-value content – the raw fuel of a volume market engine. It offers helpful insights for marketers to build and manage their content portfolios.


Commercial open source companies face formidable challenges in bringing their products and services to market. While open source provides a proven outlet for reaching target adopters and evangelists, it also presents a unique monetization dilemma: motivating customers to pay for something that is fundamentally free. Whether a company is a "pure" open source vendor that makes money selling services or an "open core" vendor that offers both open source and proprietary commercial products, they face a variant of this monetization dilemma.

As recently as the new millennium, the go-to-market path for software vendors was simple and well traveled: build a product, hire an enterprise sales team, sign on resellers, run print ads, and attend trade shows. But open source distribution radically changes the way prospective customers find, evaluate, and acquire software. What used to happen through a high-touch, closely managed sales process now happens autonomously and anonymously. This shift is subtle but profound and requires a complete overhaul of traditional market strategies. Specifically, it requires commercial open source vendors to master and apply the concepts of a low-friction, volume market engine.

This article examines key elements of a volume market strategy:

  • understanding open source customer relationships

  • progressive engagement

  • multi-channel demand generation

  • marketing automation solutions

  • high-value content

The objectives of this article are to describe the principles of volume marketing and discuss the key elements of a viable volume market strategy. This article is targeted primarily at commercial open source vendors – companies that leverage open source distribution to gain organic market adoption, with the objective of monetizing the value they deliver through their products and services.

Understanding Open Source Customer Relationships

Over the years, the author has had the benefit of reviewing many pitches and business plans for commercial open source ventures. Regardless of whether a chosen business model involves pure services, open core, or a hybrid approach, entrepreneurs and investors consistently misunderstand how customers discover, engage, and buy. A tell-tale warning sign is the presentation of sales funnel slides depicting traditional relationships between leads, qualified leads, pipeline, and deals. Suspicion is also raised when forecasts of the average selling prices for initial subscriptions exceed $10K USD.

Figure 1 illustrates a typical commercial open source relationship funnel. At any point in time, the vast majority of user interactions are anonymous and free. Over time, some users will choose to self-identify. For example, they may register on the vendor’s website to download a white paper or to attend a relevant webcast. Although no money has yet changed hands, the vendor has earned user trust through high quality interactions and compelling value exchanges. Ideally, an increasing number of trusted relationships will develop into paying customers.

Figure 1. Commercial Open Source Relationships


Figure 1 is instructive on three levels. First, it illustrates the extreme magnitudes of activity, both large and small, at different stages of engagement. There are a lot more anonymous community users than cash-paying, trusted customers. Second, it suggests that the underlying processes – the ones that motivate users to engage and progress down the funnel – must be highly automated. Finally, it implies that vendors must provide compelling reasons for users to engage, trust and, ultimately, buy.

It is noteworthy that not all open source relationship profiles are the same. Pure open source vendors, such as Red Hat, have vast anonymous communities relative to their trusted and economic relationships. Conversely, vendor-managed open source projects have relatively smaller anonymous communities. Examples include InfoBright, Alfresco, and Talend. Regardless of the chosen business model, all open source engagement is heavily skewed toward anonymous users, suggesting the need to systematically, continuously, and progressively develop those relationships.

Progressive Engagement

The objective of a volume market engine is to move as many relationships through the funnel as quickly as possible. Figure 2 illustrates the notion of "progressive engagement". Open source offers an easy and convenient means through which customers discover, evaluate, and acquire technology solutions. Vendors must understand customer needs at each stage of the cycle and offer compelling motivations to progress more deeply. In the words of David Skok, a venture capitalist and volume-market thought leader, "You have to make the customer’s decision to progress from stage to stage an absolute no-brainer."

Figure 2. Progressive Engagement


What assets do open source vendors have to offer in exchange for progressive engagement? The answer is somewhat dependent on the market and the company, but Figure 3 provides some examples to aid the discussion.

During the discovery stage, anonymous visitors typically download software, peruse support forums, and view other available technical information. Vendors sometimes choose to make certain high-value content, such as white papers and webinar archives, available to anonymous visitors to allow unfettered access during the discovery process.

Figure 3. Progressive Engagement Value Exchanges


By the time visitors have progressed to the evaluation stage, they have gained enough confidence in the product and vendor to invest more time. It is vital for the vendor to understand that time, identity, and higher-value assets are the currencies of trade at this stage, not money. To motivate visitors to invest further and surrender their identities in the form of website registrations, the vendor must offer compelling value exchanges. Figure 3 illustrates that certain forms of content offering high educational value or portability, such as PDF-formatted product documentation, may represent suitable value exchanges. Every asset being offered at this stage should motivate target visitors to willingly register.

Once a trusted relationship is established, visitors may or may not be ready to begin a traditional sales cycle. For example, a visitor who registers to attend a webinar may not be receptive to a sales call, while one who downloads portable documentation and attends a mini-training session may be highly receptive. Marketing and sales automation software provide the technological foundation for iteratively testing lead generation programs and nurturing visitor leads until they are ready to be passed to the sales team for personal follow-up.

Multi-Channel Demand Generation

From a marketing perspective, some open source vendors operate in the dark. Their attempts at demand generation are limited to promoting their products on blogs and other social media, organizing a few local meet-up events, building a degree of download traction, and then praying for a miracle to occur.

For commercial open source vendors, building a community is the beginning of the monetization journey, not the end objective. Vendors cannot rely on their open source communities as the exclusive source of commercial leads. While it is true that some community relationships will cross over from free to economic, the percentages are small and the cross-over durations can be very long. Many commercial open source vendors have "died on the vine" waiting for community users to purchase support subscriptions.

Figure 4 illustrates how vendors can improve the profile of their relationships through multi-channel demand generation. To supplement community-sourced leads, vendors often acquire lead lists from secondary market research sources, syndicate high-value content on domain-specific websites, and execute integrated campaigns with targeted media partners. Multi-channel lead sourcing can significantly broaden lead flow, but those leads must still be developed and qualified before they can be passed to the sales team.

Figure 4. Improving the Relationship Funnel


Lead sources vary widely in terms of cost and quality. Lead lists acquired from secondary market researchers are often relatively inexpensive, but they generally yield lower-quality results. Leads generated through an integrated campaign with a media partner often perform better, but they can be very expensive – often on the order of $100 USD per lead. For this reason, it is essential to have appropriate metrics in place to continuously evaluate the performance of each lead source.

Marketing Automation Solutions

Effective demand generation will yield a large number of raw, unqualified leads. Raw leads are usually not mature enough to justly follow-up by the sales team. The lead records may be incomplete; the prospect may not have need, budget or buying authority; or the prospect may not wish to speak with a sales representative. Marketing automation (MA) solutions allow raw leads to be programmatically developed to a point where they can be passed into the sales process. Companies like Eloqua, LoopFuse, and Marketo provide MA solutions based on software as a service (SaaS). These MA solutions enable large volumes of raw leads to be programmatically nurtured into qualified leads. Key components of MA solutions include:

1. Visitor tracking: website visitor activity should be tracked from the first visit, including every page visited, every link clicked, and every asset consumed. MA applications do this tracking through cookies. When visitors ultimately disclose their identities, for example by registering or clicking through from an email, all of their historical activities are automatically linked to their registration records.

Consider the discovery stage and how much anonymous activity happens during those early interactions. By observing website visitor patterns, marketers can devise effective lead segmentation, nurturing, and scoring strategies. Individual visitor histories also provide sales representatives with rich information that they need to conduct informed, efficient sales calls with leads that have been moved into the sales process.

2. Email marketing: a lot of software packages and services are available for managing email lists. However, systematic campaigning goes well beyond the mass email event. MA solutions cover all of the mechanical campaign requirements, plus they provide advanced message configuration and monitoring capabilities.

Why is this important? First of all, corporate spam filters change regularly. It is critical to be able to configure email headers and subject lines to navigate through those gates. Second, it is vital to know whether message content is, or is not, resonating with recipients. Tracking how many messages are opened provides useful insight about the strength of an email message's subject line. Tracking how many recipients click a link within the message provides a good measure of the strength of the message's "call to action". Tracking landing page activity gives an overview of the effectiveness of the campaign. Successful campaigning is all about trial and error, running tests, and continuously improving. Contemporary MA solutions provide the ability to tune email and landing page content to optimize campaign performance.

3. Lead management: leads are not static. Sometimes leads enter the demand cycle as fully-formed prospect records, complete with name, company, email address, and telephone number. Most leads, however, begin as nuggets of data and develop over time. In volume markets, the vast majority of interactions occur in the realm of partial lead information, so it is essential to cultivate those leads efficiently. MA applications provide powerful lead segmenting, nurturing, and scoring capabilities for managing large volumes of leads.

Lead segmentation and nurturing allow batches of leads to be systematically developed until they are sufficiently mature enough to warrant attention from a sales representative. To illustrate this process, consider two batches of raw leads consisting of email addresses and no telephone numbers. The first batch (A) was sourced directly from a vendor’s community; the other batch (B) was sourced from responses to a promotion for the vendor’s enterprise product. A MA system allows these leads to be programmatically pursued with different campaigns. Both campaigns may include scheduled distributions of the vendor’s e-newsletter. The campaign for batch A adds scheduled mailings of technical white papers, webcasts, and forum participation details, whereas the campaign for batch B adds mailings for white papers, webcasts, and a free day of proof-of-concept (POC) consulting. In this hypothetical scenario, the vendor may be nurturing tens of thousands of leads using different approaches, all without any direct involvement by a sales team.

Lead scoring usually happens at two levels. First, within the marketing domain, scoring is the mechanism through which lead maturity is measured. As leads respond to email campaigns, visit key website pages, and download specific assets, their scores are changed to indicate increasing interest. Once a lead has achieved a defined score, it is transferred to the customer relationship management application (CRM) for sales follow-up. The second level of scoring happens during the transfer process. Leads with certain properties are scored higher than others, allowing sales representatives to pursue the highest priority leads first, such as leads from sources known to have resulted in past sales.

4. CRM integration: all MA applications integrate with Salesforce and a subset of them also integrate with other CRM systems, such as SugarCRM. The choice of MA solution may be influenced by the chosen CRM product, so it is critical to select products that are already pre-integrated.

Although data typically flows from the marketing automation system to the CRM, it is not unusual for lead data to enter the CRM first. For example, a sales representative receives a lead from a partner and enters it into the CRM manually. It is critical that the integration between the MA and CRM systems be bi-directional, so all leads in the CRM can be included in future campaigns driven by the marketing team.

High-Value Content

If MA systems provide the power behind a volume market engine, high-value content is the engine’s fuel to motivate visitors to progressively engage, particularly in transition from anonymous to trusted relationships. The essence of that transaction is the visitor receiving something of value in exchange for revealing their identity.

Many vendors miscalculate this value exchange. Some solicit registrations using assets that visitors do not value. Others do not require registrations for high-value assets, leaving precious leads ungathered. The following proven rules of thumb can help vendors calculate an effective value exchange:

  1. Content with significant educational value, when properly promoted, will consistently command quality registrations. Examples of premium content are white papers, live and on-demand webinars, and podcasts.

  2. Content that is perceived to be largely promotional in nature, such as data sheets, newsletters, customer case studies, will generally not induce quality registrations.

Although properly packaged high-value content will drive quality registrations, they are among the most expensive, time-consuming assets to create. However, white papers, webinars, and podcasts can be considered different distribution media for the same content. We recommend building and delivering the webinar version of the content first, re-recording webinar audio for podcast distribution, and finally, developing the narrative version of slides for the white papers.

Many commercial open source marketers do not understand the mathematics of content. Consider a hypothetical scenario where leads have been segmented into three distinct target groups: i) end-user enterprises; ii) independent software vendors (ISV) and original equipment manufacturers (OEM); and iii) system integrators. Through automated marketing, the company wishes to contact all leads once a month with an offer for high-value content. In producing 3 segments every 12 months, the raw math says that the company needs to produce 36 high value content assets per year to fuel the automated engine. If half the content can be created in an audience-agnostic way, the requirement drops to 18 assets.

It is noteworthy that not all assets have to exist at the beginning of the cycle; different assets can be developed during the course of the execution period. However, the math suggests that a significant commitment must be made to content development, which requires appropriate plans, schedules, and resource allocations to meet those requirements.


Commercial open source companies face formidable challenges in bringing their products and services to market. The unique motivations and behaviors of open source users render traditional software market strategies ineffective. To succeed, commercial open source vendors must employ volume market strategies that leverage multi-channel demand generation, marketing automation software, and high-value content. In combination, these tools allow open source marketers to progressively and continuously engage open source users, developing anonymous, arms-length relationships into trusted, economic partnerships.

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