New competitors, new sales models and a more educated buyer are forcing technology and service providers to demonstrate deep understanding of their customers' businesses.
The business market demands that technology delivers visible business impact.
Technology and service providers that sell to multiple industries need to optimise and then transform their sales operations to meet vertical industry specific business needs.
Vertical orientation enables sales organisations to make the shift to selling business outcomes quicker and more easily.
Enterprise IT spending across all industry market segments in Australia is forecast to grow almost 2.5 percent to reach $80.2 billion in 2016.
The biggest spending vertical market is the combined communications, media and services sector at more than $16 billion, followed by manufacturing, natural resources and the banking and securities industry.
However, the fastest growing segments for technology spending in Australia in 2016 will be the education and utilities sectors.
Organisations that have been successful at building an effective vertical industry go-to-market (GTM) model have three things in common: focus on a select number of target markets, an outside-in view and the ability to maximise cross-functional collaboration between the sales organisation, product management and marketing.
Shift to business outcome focus quicker and easier
As far back as the late 1950s, William Simmons detected in his research for IBM that a salesperson with vertical industry expertise, rather than a product focus, produced 50 percent more than a generalist for IBM.
During the birth of personal computing, the pendulum swung back to a more product-centric paradigm. However, more recently Gartner has observed a swing toward not only segmenting the market by vertical industry, but also positioning offerings on the basis of vertical industry specific requirements. Alignment between IT and the line of business (LOB) is growing.
Technology and service providers are increasingly developing and positioning offerings to align with the industry specific objectives of their prospect and customer organisations.
A recent Gartner survey of business customers found that buyers value vertical industry expertise highly during the buying process, regardless of the phase. More than 30 percent of buyers rate it the most influential factor in each phase.
However, in some circumstances, it can also be a high-cost and high-risk approach. Investing in vertical specialisation (people, systems and processes) is usually expensive and drives up the cost of sales, unless closely managed.
It often requires a different approach to selling and incentivising those who are customer facing, as well as different skills that may not reside in the existing sales organisation. It may also result in a vendor competing with its traditional channel partners.
Successful technology and service providers have made a shift from focusing on solving a customer problem by providing a solution, to helping customers achieve a business goal by providing a blueprint.
The focus on a goal ensures that it is done in the context of prioritised corporate objectives of the customer organisation.
There are numerous and considerable benefits of selling based on vertical market segmentation:
- Differentiation of your positioning
- Value-based positioning
- Focus for sales territory decisions and improve account planning
- Access to new buyers and influencers outside of IT
- Get closer to the customers' "pain points."
- Build a knowledge base that can be leveraged by marketing and product development
- Tighter alignment with products to customers and preferred customer sales experience