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Why Segmentation Should Matter to High-Tech Suppliers
In today’s hyper-competitive market where technological solutions seem to advance at the speed of light, high-tech suppliers often feel pressure to constantly innovate. However, innovation can be a double-edged sword, particularly if it is not embraced by the market. One issue Blue Canyon encounters with high-tech suppliers is that in an attempt to stay competitive they quickly develop advanced solutions with a “one size fits all” approach. Often, the outcome is losing sight of the various segments that compose their market, lost share, and declining profits.
Today’s high-tech suppliers provide extremely sophisticated and often expensive solutions to dazzle the entire market and attempt to solve the entire market’s problems with one, high-end solution. These products end up being little more than glitzy solutions that many potential customers don’t desire either because they’re too expensive, too sophisticated, or don’t actually address the specific problems a customer faces in a segment.
One former high-tech client of Blue Canyon that was facing competitive pressure in its premium solutions category, responded by quickly developing a super-premium solution that far exceeded the competitor’s offering. The client could not understand why the super-premium solution only appealed to a small segment of the market they were trying to address. After analyzing the client’s customers and conducting an in-depth market analysis, it became clear that in an effort to be quick to market, the client neglected to understand its buyers. The client wasn’t winning in the market, because the high-end solution it offered was too sophisticated for most market segments. Most customers shied away from the client’s premium solution, because they would have been paying for capabilities that wouldn’t be useful to them.
The moral of the story is that it is vital for high-tech solutions providers to take a step back from trying to address the market as a whole and understand the different segments within the market. Segmenting by customer needs and purchasing decisions allows providers to learn what capabilities buyers need and are willing to pay for, and how to successfully engage market segments based on buyer needs and price sensitivity.
Providers must conduct very thorough market analyses before offering a new product or diving into a new market. Insights from careful market analysis can help providers identify segments and tiers that exist within a market and understand what capabilities and solutions each segment is looking for. Once the segmentation of the market is understood, solutions providers can figure out how to cater to each segment.