Last month's column introduced the importance of segment analysis and prioritization to a customer-oriented solutions approach. Although vendors tend to be lumped into a single bucket, the buying criteria for each type of user can be unique. IT usually focuses on technical requirements (capacity, compatibility, scalability), while users focus on value ­ how much will it help improve business in exchange for the investment of resources (time, money, etc.). This month we take it a step further and discuss how to implement a segmentation strategy.

What Information is Needed

The better a vendor and IT understand the users, the more effectively they can design and focus their efforts to meet the users' needs. This is especially true when bringing a new or unfamiliar product to the users. Questions to answer include:

  • Who are the existing users?
  • Who are the potential users, i.e., who in the organization could benefit from using this new technology?
  • How can the technology solve their business problems?
  • What is going to motivate them to change the way they currently do things?
  • How do these benefits need to be communicated to them so they understand?
  • What trends or strategic business issues influence the users' motivations to use it?
  • To what information will they favorably respond?

How to Get the Information Needed to be Successful

Who to Get it From: Methods for collecting answers to the questions above differ depending on the goals and objectives. If your objective is to increase market share within established segments, then analyze the current users. A better understanding and profile of current customers can accomplish two goals. First, it can increase cross-sales opportunities. In addition, by developing an accurate profile of current customers, you'll increase your opportunities to successfully reach prospects within the same segment.

The task of reaching new segments is more challenging. Without the benefit of current customers, it is necessary to go to other sources to develop an understanding of a particular market segment. There are many ways to research new segments. Primary information and secondary data can be collected from:

  • Trade associations
  • Influencers
  • Complementary products that reach the same audience
  • Internet searches
  • Articles and journalists who write the articles
  • Analysts

One of the most important goals of this research is to determine who the influencers are within a segment. Reaching influencers is an important part of developing a segmentation strategy. The value is twofold: 1) the influencers can provide a deeper understanding of the users; and 2) they can provide assistance with educating the users so the users will be more likely to adopt the new technology.
How to Get it: Qualitative research taps into that subjective vein of attitudes and behaviors that shape the buying habits of users and help define the market. The results of qualitative research go beyond the numbers to provide vendors and IT with the characteristics or attributes of the user. While the quantitative approach has its role, the qualitative approach provides a depth to market research that is not available through typical quantitative analysis.

Qualitative research is conducted primarily through exploratory in-depth interviews by engaging interviewees in an interactive dialogue to delve into their opinions and truly understand the dynamics of the users. Through this direct dialogue, users reveal their issues, needs and wants. As a result, vendors and IT are able to pinpoint strategic issues, identify trends before they happen and establish factors critical to successful technology adoption.

Example

Qualitative research and a segment analysis were well worth the investment for a major data warehousing tools vendor. The company undertook a segmentation analysis project and discovered they were targeting the wrong customers. The company had been targeting CIOs of large corporations, believing them to be the decision-makers. But the vendor wasn't closing deals and didn't know why.

Qualitative research revealed that this company's market was not, in fact, the CIOs. Corporate CIOs no longer cared about data warehousing as a strategic issue ­ other things had taken higher priority for them, and data warehousing decisions had been pushed down the corporate chain. The vendor needed to target mid-level IT managers, who now had the purchasing responsibility for data warehouse solutions.

This vendor had been wasting a lot of money and effort pursuing the wrong customers. Researching the influencers revealed that the ideal targets for large corporations were the data resource managers, information service officers, data engineers and analysts ­ not the CIOs.

The research also revealed customers' buying priorities for technology and their objections to buying and using data warehousing tools. Among the discoveries: the marketing department influenced seven out of 10 data warehousing purchases. Yet, there had been no effort to address the requirements of these buyers. James Desrosier, executive vice president of marketing, Excite, Inc., highlighted the problem, "If I tried to sell financial services under the guise of technology, no one would buy them. It's about what the customer needs and how they'll respond to the sale ­ not just what I want to sell to them."

The process of understanding and implementing segmentation strategies is dynamic. As organizations, products, customers and market dynamics change, so will the segmentation strategy.

November's column will be about how to understand the market and its infrastructure in relationship to segmentation.

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