Choosing a software provider: Incumbent vs. Challenger

In the fast-changing and competitive technology market, every technology company tries to provide the most advanced version of whatever product they offer. As a result, technology companies continuously update, upgrade and even produce new products to encourage repeat and continuous use of a brand by current customers and to attract new customers. Evaluating the incumbent company and its product offerings versus the challenger company and its product offerings can be likened to comparing incumbent and challenger political candidates. A voter’s evaluation is based upon (1) the strength of his/her party identification; (2) his/her education; (3) contact from the party or candidate; (4) general political knowledge and (5) ideological proximity to the candidate. A law firm’s technology decision is based upon one or more of the following parallel considerations: (1) the strength of his/her brand loyalty; (2) the learning curve and other associated switching costs; (3) the expertise of customer support; (4) the degree of understanding of the product; and (5) the goal of the purchasing decision.

Loyalty to the Incumbent

The strength of loyalty to an incumbent company and its products is often correlated to the perceived costs and benefits of switching to the challenger company and its products. When the incumbent company and its products have a historically sound reputation for quality and dependability, especially as compared to a new company and/or new product entrant, pre-switching costs involving the time and efforts of searching and evaluating available alternatives are too high – at least until the new company and/or new product establishes itself as a viable alternative. The more complex the products involved the less likely that the new company/new product can match the quality of the incumbent in the short term.

The Learning Curve

In addition to pre-switching costs, it is important to consider post-switching costs. After switching, the consumer must learn how to use the new product. The longer a consumer has used a particular product, the less willing s/he is to adjust to a new alternative. However, when comparing a new incumbent product and a new challenger product, the learning curve with a new incumbent product is usually less costly due to the incumbent’s understanding of its previous product and in depth insight into how its new product is the same and how it is different from the old product. Training based upon such a comparison results in a smaller learning curve than would be present in the absence of such a reference point. The learning curve is influenced by the quality of training.

Expert Customer Support

Due to a myriad of factors including staff turnover as well as the ongoing introduction of new features and functions, the availability of expert customer support and refresher training insures that a firm will be able to use the product most effectively and efficiently at all times. The customer support personnel should not only understand how the product works but the reason and purpose of each feature/function in order to best relate and accurately respond to customer inquiries. An incumbent company is more likely to have more expert customer support due to their years of experience in the industry. A challenger company could most closely match such support by hiring industry professionals.

Product Knowledge and Appreciation

The expertise of those involved in the decision making process is critical. If those making the ultimate purchasing decision are not users of the product itself, it is important that they seek input from those that are more familiar with the features and benefits needed to meet the particular needs of the purchasing firm. Otherwise, the purchaser may mistakenly believe that two competitive products are identical and/or either will fully meet the needs of the firm when, in fact, one does and one does not. It should be noted that needs can vary from location to location within the same firm.

Purchasing Decision Goals

In making purchasing decisions, law firms manage and balance financial costs with liability risk. In order to do so, they must remember to consider not only price but also switching costs and product quality. A new company may charge a low price to attract customers and usually eventually increases the price to stay in business. In response, an incumbent company may lower or maintain price. Some firms may be willing to pay more to the established company to avoid perceived risks associated with switching to an unproven challenger’s product.

Summary

Consumers value a product more highly the more other consumers buy it and experience success with it. Competition between the incumbent and the challenger motivate both to offer products that best meet the customer needs and expectations. By considering multiple criteria when evaluating new technology options, law firms will ultimately minimize risk and increase efficiency.

About the Author: Rosemary G. Milew is the Vice President of Sales & Marketing at the Law Bulletin Publishing Company. The Law Bulletin Publishing Company publishes a variety of legal and real estate publications as well as provides a number of legal software tools to help attorneys manage and grow their practices. Prior to joining Law Bulletin, Ms. Milew spent over a decade at a major legal publisher focusing on the law firm and law school markets. She received her J.D. from Loyola University of Chicago and her M.B.A. from Northwestern University’s Kellogg School of Management.

This article appeared in the Legal Technology Update published by Law Bulletin Publishing Company in April 2012 and is reprinted by permission. The LTU is a supplement to the Chicago Daily Law Bulletin® and Chicago Lawyer magazine®.

~ by CDLB on April 4, 2012.

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