Unmaking fruit salad: 6 ways to help analysts segment markets

 It’s a common challenge for providers: some new or fast-changing market contains very different solutions. Clients want either apples or oranges, but the analyst research reads more like fruit salad. As new solutions come into old markets, or as analysts try to squeeze hot new solutions into their less-exciting coverage areas, it’s increasingly hard for users of analyst research to make sense of cluttered markets.
Partly that’s the result of something that’s always been true in the analyst industry: managers like individual analysts to be tightly focussed on well-defined coverage areas. Back in 2002, our colleagues at SageCircle (which later joined Kea Company) asked 151 analysts how they worked. Even then, they found that very few analysts work across broad areas. Over the last few months, Professor Neil Pollock and I have been speaking with analysts about how they work with categories. The 2002 position hasn’t changed massively. It seems:
  • Most analysts still have clearly defined categories and use them similarly.
  • Markets cannot overlap, many analysts tell me.
  • The markets need to be explainable.
  • There’s some pressure not to create new markets unless there’s an unyielding case.
That said, sometimes market categories can be sub-divided. If there’s increasing interest in an area, then analysts are more likely to segment it. Even then a single person will often cover all the segments because an analyst firm’s opinions have to be consistent and not to conflict with adjoining segments.
Sometimes, the driver of new segments being divided from each other might be technical differences: Most usually, that is the case. But the differences by themselves are not enough unless it produces very different buyer choices, and the solutions don’t work as substitutes or competitors for each other. Furthermore, various vendor strategies,  or decisions by the groups of providers (e.g. telecoms versus IT firms having different approaches) can be used to justify segments to markets.
There are five general tactics I recommend to vendors who want to encourage analysts to create sub-segments that separate their offers from others.
  1. It’s not about you. You won’t convince with an argument centered on the hope that, because your firm is in one corner of the market, that corner should be separate. Even though the points you’ll make to support that argument are reasonable and well-presented, that is not enough. You need to give them more of a problem, so the benefit is bigger than the effort.
  2. Precedent counts. Look for other markets where the analysts’ colleagues have segmented a market similarly to the way you propose. Is there another category that is, for example, divided between OEMs and branded; vendors versus resellers; cloud versus on-premise. Use those examples to suggest that the market is moving in the same way.
  3. Markets have a lot of competitors. New categories need ‘enough’ providers to justify the effort taken by the analysts. A Magic Quadrant with five dots just can’t make it anymore. Luckily analysts are often not aware of the full range of substitutes and market participants and, indeed, you might not have mentioned them all. A new market segment needs a list of at least 10 to 20 vendors. Get that list together (your salespeople, new employees, and clients can help) to help the analyst see the possibility for growth in the market, and in their responsibilities.
  4. Finding proof is a team sport. Can you work with others on those lists to share the same opinion? Are there others making the same argument?
  5. You can’t hurry love. This can be a medium-term project. If your view of the market is accurate, then sooner or later, the analysts’ presentation of it will look something like your current picture.
  6. Marketing matters. At some firms, and especially the larger ones, the adoption of new concepts is very often accelerated by marketing considerations. If you can show events, suppliers, academic papers or other items that segment the market in your way, and if you can suggest they can get better market traction through innovation, then you might be pushing at an open door.

What other approaches have you used to shift market perceptions?

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As SageCircle research director, Chapple directs programs that assess and increase the business value of relationships with industry analysts and sourcing advisors.