Gartner Advises Technology Providers to Implement Advanced Customer Segmentation Methods

Updated Segmentation Positions Technology Providers to Take Advantage of Advancements in Automated Lead Management and Lead Scoring

STAMFORD, Conn. — How companies segment their customers for their products and services is one of their most strategic activities, but most providers are giving it scant attention, according to Gartner, Inc. For many technology providers, segmentation typically stops at demographics.

Gartner research shows technology providers how deeper dives in customer segmentation can help them:

- Improve campaign response with finely tuned messaging that is more effective at targeting the interests and emotions of target buyers

- Select indirect channel partners whose customers align more closely with their own customer base, capabilities, go-to-market strategies and market share objectives

- Avoid wasting sales time with prospects whose attributes make them an unlikely buyer, allocating more time to those who are likely to be easier to sell, more profitable and more loyal over the long term.

“In response to the current economic downturn, many providers are doubling their efforts on historically profitable customers,” said Richard Fouts, research director at Gartner. “However, many customer segments that were profitable last year have experienced major upheavals and are dramatically shifting their priorities, resulting in the need for an update of previous segmentation exercises.”

Mr. Fouts said that just about every technology marketer Gartner advises segments on demographics, for example size, location and industry. But by segmenting on things like business environment, psychographics - which define how customers buy – and other demand drivers such as triggered events, providers can dramatically improve their conversion rates and qualified lead volume.

“Our research shows some dramatic examples. One technology provider grew revenue from $2 million to $100 million in five years after implementing its segmentation strategy, which initially started with regulatory affairs managers in Fortune 100 pharmaceutical companies,” Mr. Fouts said. “Today, the company owns the document management market in pharmaceuticals, and it has secured impressive market share in other key verticals by replicating the segmentation approach it took in pharma. Another case study showed how a software company quadrupled its lead volume within two quarters of operationalizing its segmentation model.”

The most productive application of updated segmentation is lead management - particularly automated lead scoring. By converting segmentation criteria into business rules how leads are rated, or scored, providers see an immediate boost in lead volume and lead quality.

“Even those who generate less leads resulting from a tighter, smaller market focus, report higher lead quality, which can help providers close deals faster and improve cash flow,” Mr. Fouts said. "Segmentation also helps vendors form communities around customers with common interests, which is critical if providers want to take advantage of using social media to create buzz in their target verticals.”

Gartner has seen interest in automating lead management since the technology for such applications moved out of the Trough of Disillusionment in its Hype Cycle for CRM Marketing Applications.

“Many providers want to take advantage of the increased know-how we’ve garnered over the years about lead scoring together with more innovation from technology providers. Before now, the technology and experience was in an immature state that delivered more hype than results. That has changed as many vendors, such as Silverpop, Unica and Eloqua, have improved their offerings for marketing automation. However, initiatives for automated lead management and lead scoring must be preceded by a well thought-out segmentation exercise,” said Mr. Fouts. “The Gartner model for customer segmentation provides a valuable tool, proven from years of practical use, saving marketers the time and trouble of developing one from scratch.”

Gartner advises hundreds of technology providers in client inquiry, analyst briefings and custom consulting projects in how to refine their go-to-market strategies. Gartner Consulting has developed a particularly deep level of experience with segmentation through 20 years of client engagements, using a model it has refined to help providers tighten their segmentation.

This model is available to clients in Gartner’s Marketing Essentials research with the note, “How to Segment B2B Customers”. The report includes some examples of how an updated segmentation exercise can make a sizable contribution to bottom-line business performance. The report also provides detailed information about the recommended Gartner segmentation model and its applications for stimulating growth.

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.