The Voodoo of Market Research - Part I

There are significant public disagreements between analyst firms and reality about the accuracy of their data. Take concerns about Gartner's sizing of the server markets and IDC's analyst goings and comings and the associated conflicts between analysts on market sizes and forecasts. Market research is still very important to investors and with vendors for forecasting & planning, but savvy executives have begun to move away from "betting the farm" on what these researchers say and are relying more on developing their own internal methodologies and resources to do their forecasting.

Basically, the way that market research firms produce their numbers is to ask vendors for data on shipments, revenues, etc. and feed these into their own proprietary market models.

These models, many of which have been in use in their basic forms for decades, are then used to crank out their estimates as to market size, growth, share, etc. The researchers then usually validate these numbers using public information on vendor revenues, etc. and primary research with buyers. In practice though, not all numbers come from the vendors or public and primary sources. Many researchers, especially those who are working with mature, long-lived models will estimate inputs to their models based on their observation of the marketplace and run it by the vendors for validation.

Though expedient, this practice will almost certainly introduce errors over the long run.

Market research is only as good (or bad) as the model used to generate it. These models are the source of frequent debate amongst vendors, researchers and their firms. Vendors want them to incorporate elements that work to their advantage and the researchers and their firms opt for consistency and will vehemently protect "their" model from internal and external attempts to change it. The single most contentious issue is how the raw data is collected from the vendors and then validated by the researchers. In some firms, the same relatively senior researchers collect and analyze the data and then author the report, in others, junior staffers collect, while the authors analyze and report. Using senior researchers to do everything is expensive and is difficult to oversee or police, while using junior, inexperienced staff for data collection increases the chance for mistakes and inconsistencies. Some of the criticisms the Market Researchers face are:

• Not giving vendors enough time to respond to requests for data
• Lack of coverage of emerging markets
• Not doing enough primary research and thereby putting
• Too much stock in numbers given by vendors
• Double counting revenues - Some vendors report the same revenues in multiple different categories and some don't. This leads to bad input and no matter how good the model, the results won't reflect reality.

The practical reality is that every researcher, at every firm has weaknesses in their models. Most of the time, these weaknesses have little or no bearing on the outcome of the report, but sometimes they have a huge impact on the viability and validity of their findings. In general the key to good models is to develop ones that minimizing the guessing that goes into the numbers they produce. To do this, most firms and researchers strive to build models that have the following common characteristics:

• Detailed description of marketplace and its exact definition and segmentation
• Consistency of inputs across multiple disparate vendors.
• Currency of model in an ever-changing marketplace.
• Relevancy in hard to define marketplaces.
• Accuracy in verifying and justifying inputs from multiple vendors.
• Uniformity in handling cases where little or no information is offered by some vendors while others fully comply.

Accountability of numbers used as inputs through full disclosure of sources, assumptions, etc. includes disclosure of which numbers come from audited financials, and which are simply provided by vendors with no back up or validation.

Be aware that vendors play games with market share numbers. It should be no mystery that every technology vendor wants to present their products in the most positive way possible and it also should not be a mystery that sometimes they get a little carried away. Though self-defeating in many ways, vendors play with numbers to make themselves more attractive, viable, stable and competitive than they really are. In the market research world, this overzealous behavior usually results in artificially high or low numbers (depending on which is more advantageous) being reported to the researchers. This is exactly why good market researchers rely on their models and not the vendors' numbers when reporting share, etc., but sometimes some of these "bad" numbers creep through. Market researchers are expected to catch these numbers, but it is impossible to catch them all.  More on this topic in coming posts...

Research is Key with your LATAM (Latin Americian) Strategy

Recently I was having drinks with a colleague of mine from a major European analyst firm and we began the debate around market expansion and the future of doing business in Latin America. While many organizations find it compelling to enter a market that has substantial opportunities, companies looking to expand into Latin America should do their homework before they make an investment in that area. In Latin America, the business, technological, and political environment is much different from the United States and other areas of the world. Before companies expand into the Latin American market, there are a number of issues that must be researched and analyzed. Without due diligence, a company may suffer substantial financial and market opportunity losses.

Expanding into Latin America will prove different from domestic, European or Asia Pacific market expansions. Business models and marketing strategies that are effective in the United States may not mesh with the cultures of Latin America. The prevailing political, social, economic, and business environment in the different countries and cultures will often times dictate the development of solutions unique to the circumstances. Companies need to consider the multiple and diversified cultures in the region, the stability of the local currency and political structure, the state of technology, and the purchasing power of businesses and individuals. Thorough market research on the region is essential prior to entering the market. The information gained will provide the basis for internal infrastructure development requirements and reasonable growth expectations. 

 

Political environment: Some of the issues to research first include the political system in place, the strength and stability of the current regime, and the government's position on technological innovation. Determine whether the government is considered to be populist or corrupt, and whether elections generally are considered to be free and democratic or fraught with inconsistencies and allegations of fraud. If the findings point to political discord, then the risks associated in entering the market are greatly increased. Political instability can have substantial implications on international trade. Foreign investment tends to dry up, leading to an economic slowdown and a subsequent devaluation of the local currency, thereby reducing the locals' ability to purchase foreign products and services.

 

But democracy is expanding in Latin America. With democracy, new markets are opening up, and opportunities for technology companies grow. Many governments in Latin America are now focusing their attention on infrastructure development, and some have recently privatized their telecommunications and other industries to increase foreign investment and the speed of development. Latin American countries and companies are leapfrogging over older technologies, and are building the necessary infrastructure to compete on a global level. Understanding the priority that the local government is placing on technological development will assist companies in identifying growth opportunities and the suitability of their products or services.

 

Regional trading alliances (e.g. CAN, OAS, NAFTA, CAFTA, Southern Cone, etc.) should also be researched. They are growing rapidly and are helping make export-import laws less restrictive. Companies that are considering entering the market must have a solid understanding of the laws, particularly as they relate to their business. This knowledge will influence a company's decision on whether to enter the market, where they enter, and how to enter. Reputable law firms located in the targeted markets, with experience in the company's line of business, will prove to be invaluable resources for this research, and will provide the added benefit of introducing the company to their network in the region. Additionally, there are several analysts who are knowledgeable about region and country specific regulations that could save you considerable money and keep you from having to hire a lawyer.

 

Currency stability: Another area to consider is the stability of the local currency. Brazil is one of the region's strongest markets for software solutions providers, but the fluctuations of the currency, the Real, has made many companies nervous about entering the market. With any international market expansion, there are increased financial risks. Companies need to review the current market valuations, historical valuations and have a good understanding of the country's monetary direction. Even slight fluctuations in a country's currency can translate into substantial losses - especially with the current condition of the US dollar. Trade terms and foreign currency hedging can help mitigate some of the risks. Investigating the standard trade terms of the local country (e.g. payment in U.S. dollars vs. local currency, cash in advance, letter of credit, documentary collection, open account using export credit insurance, and open account) will also assist in assessing the risks of expansion. Companies with little experience in foreign currency exchange, international trade terms and other export-import issues should secure the services of a consultant or financial institution that possess expertise in the targeted country. 

 

Cultural understanding: Business practices are different in Latin America, and vary from country to country. Companies must understand that the pace of doing business in Latin America is traditionally slower, particularly when negotiations are underway. Nobody rushes into business in the region. Pleasantries are mandatory before jumping into business discussions. Relationships with a long-term commitment are the norm. Best practice requires that companies understand and embrace the local business customs -- not doing so could shut the company out of the local market.

 

Other cultural issues to examine are related to the company's product or service, and its usefulness in the local business environment. Some modules in software packages will need to be modified or removed. Localization (translation) capabilities must also be evaluated. Again, local business partners will be able to assist in addressing these issues and other cultural modifications necessary for success.

 

Purchasing power: Sixty percent of the buying power in Latin America is controlled by the top 20 percent of the population. This demographic has an average income that exceeds three times the regional average. Not only is this wealth concentrated in certain individuals, but also in geographic areas. Typically those with the greatest level of purchasing power, both individuals and companies, are centralized in the country's capital city or other large metropolitan areas. Within these areas, wealthy individuals tend to concentrate even more by living in only three to four neighborhoods. This concentration of wealth makes them easier to target, and may make business models that have been ineffective in the U.S. feasible in Latin America. By researching the idiosyncrasies of this demographic; companies will gain invaluable insights that will guide their business and marketing strategies. 

 

To identify growth patterns and market potential, research these factors: the historic trends, Gross Domestic Product, per capita income, and average disposable income for the targeted country. Two factors are vital to a company's success. First, the market entrant must identify the top 20 percent prospects with purchasing power. Secondly, the entrant must develop relationships with the right individuals within this group. In Latin America, numerous industries are oligopolistic in nature. A handful of large companies control substantial portions of the market, and many of these companies are family owned. Connecting with the patriarchs of these families will, with time, open the doors to their network, and hence, additional growth opportunities. As relationships take time to develop in Latin America, initial research must include a list of key individuals. Native agents and, to a lesser extent, consultants with expertise in the region can assist the company in identifying and developing relationships with the players.

 

Technological Infrastructure: Companies need to know which technologies are in use in the country that is a candidate for market expansion. For the most part, Latin American countries do not have technology as current as that used in the U. S. Although this is changing, Latin American countries are behind the technology curve because of expensive set-up and operating costs. 

 

Market entrants in Latin America need to understand the candidate country's technological infrastructure, the role of the local government in its development, and the competitive trends shaping the business environment. An entrant's research should include a broad, overall assessment of the region's infrastructure, and deep evaluation of technology as it relates to the entrant company's market. But keep in mind, as the different markets continue to open up, U.S. firms that stay out of the region due to concerns over the current state of technological infrastructure will lose. Several analyst firms such as Pierre Audoin (Sourcing & Software), IDC, Yankee & Pyramid Research (infrastructure & Telecoms) have solid coverage of the Latin American market and could be a valuable resource to help you get a solid understanding of the technology landscape.

 

Technology companies that are considering expanding into the Latin American market must conduct sound market research before they enter. The region is experiencing tremendous growth, and could provide substantial increases in a company's revenue and profits. Success in Latin America is tightly tied to understanding the local political systems, currency stability, purchasing power, and state of technology, and, embracing the local business practices and cultures. Not doing so can lead to substantial financial losses, and can shut the company out of the local market.

Marketing & Influence Guidelines During Times of Economic Downturn

If one is in business long enough, there will come a time when economic growth slows and the business endeavor becomes correspondingly difficult. Many younger managers whose careers developed and flourished in the last boon were, by popular accounts, left "flat footed" by the last market implosion and recession and the continuing period of economic instability that followed. It is in such times that the skills of marketing professionals are most tested. While non-trivial from any viewpoint, a variety of fundamentals may be addressed in such a way as to mitigate the downside potential of recessionary factors so as to allow companies to emerge ever stronger once recovery begins.

Recessions are typically defined as an overall slowing of economic activity. Since there are many measures of economic activity as to what constitutes "slowing," there can be many definitions of when recessions begin and end. The National Bureau of Economic Research (NBER), a non-profit organization that assigns dates to the beginning and end of downturns, defines a recession as "a period of declining output and employment." One common and often cited definition of the beginning of a recession is two consecutive quarters of decline in Gross Domestic Product (GDP). Such downturns are usually associated with periods of declining employment as well as output.

Recessions can be of various durations; since 1945, the average recession has lasted 11 months. While, at the time of this writing, the U.S. economy is not technically in a recessionary period (although the media and upcoming presidential elections have created an interesting Psychological lassitude in the industry); nevertheless, the warning signs are present.

Fortunately, as we learned with the last downturn, new hyper-competitive industries emerge - especially within computer related technology and pharmaceutical sectors. As it turned out, heavy U.S. industries also reinvented themselves, with better cars and new ultra-efficient minimills in the steel business. So what's the problem then? Unfortunately, the fundamentals never change so it is rather easy to trace current problems back to the same roots that caused the 1980's recession: energy prices. Of course today, as always, there are mitigating factors. Yes, we had a greed-driven real estate bubble that rightly burst....causing a crisis for 401K plans, the market, jobs, et al.. As stock options became worthless, gasoline became expensive, paper worth declined, global turmoil occurred, and massive tech-sector layoffs became daily events. We have again slipped into the precursor psychological state - largely driven by the media - required to fully precipitate a double-dip recession. This is not to say that it will happen, only that the conditions are, in fact, present.

Downturns are usually rated by three parameters: their depth, duration, and diffusion. Depth describes how deep is the slowdown; duration addresses the length of time of slow growth; and diffusion quantifies how widely it spreads relative to geography, industrial segments, etc. It is the task of senior marketing professionals to make judgments about these factors before informed decisions can be made as to what strategic and tactical correction are in order. For instance, a light, short, and tightly confined downturn, especially if it affects other industries, might call for no changes whatsoever.

If and when it is decided that action must be taken, then what should be done? The challenge facing both  marketing professionals and top management, is to properly consider a whole set of possible adjustments in the customer and marketing mix. The following 5 best practices are designed to help facilitate exploration of the issues involved:

1.   Don't panic. So many companies, especially those where the "bean counters" run the show, make the mistake of instituting draconian cuts that cross all departments. The mantra usually is something about how "everyone must do their fair share" during these tough times. And it may be true that cutbacks have to be made; however, the way it's done must be with an eye on the future recovery and how the landscape will look once the recession is over. Recessions represent a real and substantial opportunity for the bold to change the "lay of the land." When talking to the analysts don't be ashamed of stating you are making cuts or having lay-offs. That said, you must follow-up with how you will continue to grow and remain competitive during and after the down turn.

2.   Increase market share. Wall Street Journal statistics indicate that, during recessions, the average surviving business picks up almost 0.7% in market share, and that significant market share gainers increased their advertising by 28% or more for a 1.5% market share increase. In times of downturn, companies must reexamine their markets and consider those having the best potential for expansion. Withdraw from losing markets and redirect that investment where it counts. To offset slackened buying from existing customers, search for value in hidden segments and new geographical areas. The quickest way to show industry influencers that you can execute on this plan is to back-up all of your communications with both referenceable customers and regional - sales driven - partnerships.

3.   Reevaluate the product mix and design. During the good times, companies tend to proliferate new products, or customized versions of core products, until every market segment has coverage. An economic slowdown is the signal to analyze product-line profitability and subsequently cull the weakest of the herd. The resources, thus freed, should be redirecting to the winners. Thought should be given to introducing high-value (economy) versions of products facing significant competition in the marketplace; however, do not mistake cheapness for value - the analysts and more importantly your customers will know the difference. This is a great opportunity to build stronger relationships with your key analysts by inviting them to participate in your product roadmap. Many analysts, especially at Gartner & Forrester, have unique insight into what your customers are buying and what technologies they are investing in.

4.   Reexamine your Influencer strategy. All departments are usually expected to "do their share" when the inevitable "belt tightening" command comes down from the top. However, be well aware that historical data conclusively demonstrates that companies that cut spending on access key industry influencers and market intelligence generally lost sales, market share, and took longer to recover than did similar companies that increased their analyst spending levels. Obviously, this is not to say that one should not be sensitive to AR and marketing costs. Usually, during times of recession, sales promotion techniques are often increased, at the expense of traditional marketing, advertising, and Analyst Relation, because many customers become highly "deal prone, and more importantly, effective AR drives revenue - say it loud, say it proud!

5.   Look for acquisition partnership opportunities. So the recession is in the thick of things and the competition is in trouble. Perhaps, under the right terms, it's time to consider a strategic expansion. While the complexities and issues involving either of the aforementioned strategies are well beyond the scope of this discussion, it should be said that an acquisition is an investment that should be done only if it directly enhances shareholder value. Partnerships can be an easy way to synergize various marketing and sales operations, to effectively leverage other companies to enhance market share or as an alternative sales channel. One caveat to consider is that a good deal is only a good deal if it's good for everyone; that is, real partnerships must have some underlying equality and ability to drive revenue. Industry analysts, especially market research firms like IDC or Datamonitor, are great resources for identifying acquisition and partnership opportunities.

Recessionary economic environments pose major challenges for most companies. Often they are tempted to cut out critical investments during downturns to preserve some arbitrary profit margin requirement. The danger in that approach is the price to be paid once recovery starts... namely that compromised customer goodwill, together with lack of up-to-date offerings, will effect a permanently weakened condition. Some companies that go through hard times manage to keep their eyes on the future and continue to invest in their long-term position. The key lesson here is that companies must make long-term commitments to certain markets and strategies and should NOT abandon them at the first sign of trouble.

Measuring the Effectiveness of an AR Program in a down market

One of the biggest challenges marketing pros are running into (with their jobs on the line) remains how to measure an AR program's effectiveness when times are tough? Unlike PR, which can be quantitatively measured via top-of-mind awareness or number of mentions, AR is a completely different beast. AR is about relationship development and management. It is about multiple one-to-one relationships. How do you put a tangible measurement on the intangible aspects or strength of relationships?

In today's economy Buy-Side or End-User Technology buyer (ETB) focused Industry analysts are wielding increasingly more influence over purchase decisions. Vendor executives realize that their companies must positively influence these influencers but budgets, headcount, and resources are being scrutinized and cut. Every program and every business unit must justify its purpose, its return on investment, and hence, its existence. If they are unable to show the true value AR brings to the organization, the program is dropped.

First it is important to understand your goals and what you want out of your AR program. The long-term goal for every AR program should be to develop relationships with the leading industry analysts in the company's market space to the point where the analyst's recommendation of the vendor, or their inclusion of the vendor in their published works and press quotations leads to

additional revenue for the vendor. In the short-term, companies should look at AR as a way toimprove their competitive intelligence, to receive tactical assessments for product development, to obtain "expert" analyses of, and recommendations for their product or corporate strategies, and to build buzz about their product and company. Without the support of executive management, an AR program will be relegated to corporate road kill. Similarly, without clearly identified and documented goals, objectives and plans, an AR program cannot be measured.

So the question remains: how does one measure the effectiveness of communications with key analysts, the development of positive working relationships with those analysts, and the internal maximization of the knowledge generated from the company's relationships with the analyst

community? Start with the basics:

Targeting & benchmarking top analysts

As we are asked to do more with less, it is important to focus your resources on the key analysts in your space - so the following questions need to be answered. Who are the key analysts that cover your space? Have you created a ranking of your analysts by business initiative? When was your target list last updated?

Once you identify and rank your top analysts it's necessary develop a calendar for outbound interactions based tier (your tier 1 analyst list should not be longer than 3-7 analysts and you should contact them at least 3-5 times per quarter). Develop a process for triaging inbound requests based on the "incoming" analyst so you can ensure you are not letting anything slip through the cracks and more importantly not spending too much time with non-influential

analysts.

Getting a baseline of your analyst relationships and research coverage

Once you identify and tier your top analysts you need to understand how often are you mentioned in their research, in what context, and by whom? Does your competition get more coverage than you? Is there movement on the firm's signature research deliverables (e.g.:Gartner's Magic Quadrant)? Honestly assess the reach and influence of the firms with whom

you have contracts or relationships. Just because you have a great relationship with an analyst does not mean their firm has the clients that let them provide your organization with any value or influence at the point of sale. Ask whether your organization gets value out of research and inquiries. Do you actually use their services, or are you paying for more than simple access to their analysts?

Advanced Metrics

Measuring individual relationships is a qualitative exercise. Periodic analyst perception audits can provide valuable insight into the health of your relationship with each analyst. Perception audits can help vendors identify what customers are hearing, what the analysts are saying, and where both are getting their information. When conducting a perception audit ask your key analyst specific questions about your relationship with them versus your competition. Some common AR effectiveness metrics include the number of interactions the company has with individual analysts, how the analyst perceives you in effectiveness, responsiveness, efficacy of communications, differentiation, access to executives, where they learn about the vendors and

marketplaces, and most importantly what is their their likelihood to shortlist or recommend you.

However, before you audit your analysts make sure you understand each analyst firm's survey policy as many firms have very stringent, difficult and ever-changing policies for surveying their analysts - even if you are a client.

The success of an AR program is the sum of multiple tangible and intangible events, some that can be quantified, others that are difficult to measure, even from a qualitative vantage point. In difficult times each organization must determine not just what type of relationship they wish to have with analysts, but how to get the most from those relationships. AR managers that are

committed to partnering with analysts can use both quantitative and qualitative metrics to measure their Analyst Relations program's effectiveness, will realize substantially greater value from their analyst interaction and analyst firm subscriptions and will be able to show the true value of AR at budget and planning time.

Start-ups and the Industry Analysts

One of the bright sides of the general collapse of the economy combined with the intrusion of big government is the emergence of self-reliance and entrepreneurship. We have seen a spark of innovation in the industry that is provoking many start-up companies to take the go big or go

home attitude with their companies. In the absence of investment and venture capital dollars to fund marketing opportunities many companies are turning to the analysts to get product validation, contacts, and exposure in the industry. A word of caution; while this is a good strategy, AR pros must have their preverbal ducks in a row before engaging with the analysts.

In many start-ups executives tend to focus too much on their products and what it does - feature and function. However, in this new economy executives need to be prepared to discuss a broad range of topics when initially meeting with the analyst community. Additionally, it is easy to become desperate and with hyperactive CEOs too many vendors feel compelled to brief the analyst community at the earliest possible moment so as not to be trumped by their competition.

Announcing too early means that the natural evolution of product and market plans will start to look like a strategy du jour of a floundering vendor or, worse yet, a solution searching for a problem.

The biggest challenge for start-ups is overcoming the reasonable skepticism of analysts, especially the dealmakers/breakers (Gartner, Forrester). Frankly, start-ups come and go with alarming speed. This is in part due to the lack of experienced professionals to staff all these new companies, but also because of the lack of real-world experience, skills and domain expertise in the venture capital community. Consequently, new vendors need to go into their initial analyst briefings fully prepared to demonstrate not just "an insanely great idea" but their ability to execute as well.

Analyst Relations is about relationships so it's vitally important for the company to own that relationship from the beginning to end. We recommend NOT using your PR firm for anything other than scheduling briefings and managing the calendar. That said, you must ensure you have the following completed before engaging with the analysts:

Have your Strategic Positioning Statement in place. A crisply articulated Strategic Positioning Statement is a standard requirement or any analyst interaction. This includes who you are, what you do, why you are different, and why people buy from you.

A product should be available. There are a few exceptions to this rule, but very few. Vendors should have at least a late beta version of their product ready prior to talking with the analysts. There should be at least some beta customers. No referenceable customers = no briefing - period. Even a software company whose initial product is really more "consultantware" (i.e., a nearly unique piece of software code for each customer) has a better opportunity of validating

their vision than a vendor without any customers or references.

Well thought out plans should be in place. One way that a vendor can start the process of building credibility with the analysts is to show that they understand the various issues they need to address, they have a prioritized plan to address the issues and that they have a roadmap for acquiring the resources needed. This does not mean that the vendor has to have the answers, but they should at least know the questions. It is important to predetermine what should be planted in the mind of the analyst at the end of the interaction. Not only will this help focus the interaction, but it will also drive the creation of the presentation and supporting material.

It is important to predetermine what should be planted in the mind of the analyst at the end of the interaction. Not only will this help focus the interaction, but it will also drive the creation of the presentation and supporting material. Key outcomes include:

Target the Right Analysts. With limited resources and budget, many startups tend to focus on the analysts that pay them the most attention. This causes executives to waste time speaking to analysts that cannot help them drive revenue or even exposure. It is important to focus on the most influential analysts in your market, not just the ones that write about you or will provide a comment for a press release.

Establish a Compelling Vision and Differentiation. With so many vendors introducing themselves to the analyst community it is important for new vendors to show that they have solid insight about their market and are not a "me too" latecomer.

Demonstrating Understanding of Key Issues. The desired outcome here is to prove that the new vendor has a realistic view of the world with plans and priorities that appropriately match the product vision and resources available.

Proving the Ability to Execute. Although many companies are being forced to become "Two guys in a garage" again (and that may be the romantic myth of the IT industry) in this day and age it is important that new vendors show that they have the management skills, people and financial strength to survive the start-up phase.

Placing a Stake in the Ground to Establish Future Credibility. Because of a paucity of actual reference customers, new vendors need to lay-out milestones for the next two to three quarters, the execution of which will be the foundation for building credibility.

They just want your money - so why work with the Influencers?

In my experience this is probably the least asked question by the technology vendor community. Most vendors see market influencers, especially the industry analyst community, as a necessary evil. They know that in many cases the analysts hold direct influence over which vendors are
considered, what gets bought, and what price is paid. What they don't usually know is that there are really only two analyst firms in the industry that have the broad power to influence decisions at the point of sale - Gartner and Forrester (we call them Deal Makers/Breakers or DMBs). The problem is, there are literally hundreds of other firms (with about as many different business models), in the market that can help you with achieving some aspect of your strategic marketing goals - but can't directly help to drive sales.

First, it is important to determine what you want out of your influencer interactions - Exposure or Influence. 

Exposure

If you are turning to the influencers for exposure there are several things to consider. First, validation and external measurement of your message are extremely important to any strategic marketing program. Market Research firms or Talking Heads like IDC or Datamonitor are excellent sources for not just getting a reality check on your marketplace, but as a vehicle to taking it to the market through the media. Other, more focused, market research firms can
provide help with internal planning, validation or positioning. However, outside of the trade press, there is little they can do from an exposure standpoint. One thing to keep in mind is all market research firms get a large majority of their revenue, normally over 90%, from the vendor community.

While they can provide good channel and strategic help, there is little or nothing they can do to influence an end-user purchasing decision. In addition to market research firms there are several other types of influencers that can directly help with your exposure efforts. The most obvious of influencers is the press and/or the media, but Point Player firms (firms that focus their coverage areas on a specific vertical or horizontal technology market) like ARC Advisory, Tower (acquired by The Corporate Executive Board), or the Consultant/Wannabees or Analyst for Hire firms like Aberdeen, Hurwitz Group, or The Patricia Seybold Group fit the bill as well. These firms are good sources for visibility and exposure in the marketplace, but like market research firms can do little or nothing to influence a deal.

To be fair, many Point Players do have some influence with a select group of end-users, especially in vertical markets.
 

Influence 

Many vendors and most PR firms confuse exposure with influence. In today's market there are really only 2 kinds of influence that matter to technology vendors. Influence over revenue or sales, and influence over a company valuation or stock price. Direct influence over a stock price or company valuation is easy to measure. However, influence at the point of sale, especially
when it comes to the industry analysts, is usually very difficult to measure.

Leveraging influence at the point of sale really comes from only two sources - end-user analyst firms like Gartner or Forrester or the companies that actually help to implement technologies like systems integrators and/or procurement consultants like TPI, Equaterra, or Everest Group. Many of today's end-user CIOs leverage the systems integrators and the industry analysts as a form of
job security or insurance. Working with either of these two types of firms can be extremely difficult because most of their revenue comes from the end-user community not from vendors. The reality is though, for most vendors (especially software), how well you work with these influencers can be the difference between life and death.

The flip side of managing influence is working with financial influencers (financial analysts, institutional investors, venture capitalists, investment bankers, etc.). These folks have an enormous amount of influence over your stock price or company valuation. Unfortunately, just working with these guys won't cut it at all.

It is difficult to gain traction without mastering all of the other elements of influence - market validation, positioning, exposure & media, customers & revenue. Like the other pieces in the puzzle, influencing the influencers takes very specific skills and the discipline to master each. Influencing the press is very different from influencing the end-user industry analysts and
requires two very different skill-sets. When developing your influencer strategy it is important to understand how each type of influencer plays into your overall marketing strategy. Understanding the differences between influence and exposure and managing how each potential type of influencer can offer them are your paramount concerns.

Once you have identified each influencer, their place in the market, and how to leverage them you can then develop the plan and personnel for going after each one. If you have a PR firm, be careful. Chances are they will claim to be able to manage every aspect of your influencer program. In our client's experience, we find that thought they are typically very good at some things, (PR activities, scheduling, and media campaigns), but not very good at others (Targeting analysts, developing AR strategy, AR training and pitch development). Conversely, this is not an area where you should try to manage the entire process internally. Leveraging third parties, associations, and or peers from other vendors will provide you with sound insight into launching a successful influencer campaign.

The Circle of Life: Anayst Firms are Vendors too

The high tech analyst industry is joined to the technology industry at

the umbilical. They are an integral part of the high tech landscape.

There is a lot of common ground between analyst firms and high tech

vendors. The myth in the vendor vs. analyst world is that analyst

companies predict, but do not experience, downturns. But keep in mind that

analysts are vendors too, and if they are unable to run their companies effectively,

then you will be the one who is affected. Usually, the result will be in the form of

poor research and analysts that know little about you. Not only will this downturn

affect the quality of their work, it will also impact their product offerings and their

coverage focus.

For most of the analyst firms this has not been a good year. Part of the problem has

to do with lost focus related to advising corporate America on how to use technology

as a competitive advantage. In these tough times, analyst firms will have to focus

on the more practical advisory services because that is what sells and will continue

to sell. Strategic advisory services and research will not be as popular or as

lucrative. It is time to put away the crystal balls and get practical. Some of these 
firms will need to rethink their strategic positioning and product direction. And any

analyst firm that doesn't trim the fat, and focus on its core competencies will face

an uncertain future.

The downturn in the fortunes of the analyst firms should come as no surprise to

anyone familiar with how closely tied the analyst community is to both corporate

America and the technology industry. The firms that will succeed in the coming

months and years are those that take this opportunity to align their core

competencies with the requirements of the market and develop a value proposition,

that differentiate themselves from their competition and that communicate a solid

return for the money spent. It is imperative for those firms that do not have the

size and resources of the "big boys" to focus their coverage on the key enabling

technologies that can offer the best return on investment to both the major

corporations and the small-to-medium business sector.

While strategic predictions are an integral part and core offering of market research

firms, those who have emphasized this type of offering have lost momentum. These

firms have touted their domain expertise and used this expertise to predict market

directions and growth rates of current and emerging technology markets. These

same firms offer strategic consulting based on these predictions. When times are

good, the vendors and the major end-users will purchase this type of market

intelligence and consulting. When the markets are down, the funds for such

information are considered discretionary and dry up. Consequently the firms that

have realigned their practices away from the practical services, the so-called nuts

and bolts offerings, have struggled to make revenue and operate at a profit.

So what does this portend for the vendor community and other users of the analyst

firms' products, subscriptions, and services? First, all of the analyst firms are

restructuring and realigning their organizations and their offerings. Consequently,

coverage areas and the various services offered are in a state of flux. This means

that it will behoove current and potential clients of said firms to keep abreast of the

changes being implemented at these firms and how they will impact both the

analyst firm/client relationship, as well as the relationships they have with specific

analysts. If the emphasis on market coverage is substantially reduced or eliminated,

a vendor should rethink the value of the relationship at contract renewal time.

Building a relationship with an industry analyst requires a considerable investment of

time and trust. It would have a significant impact on a company's market viability if

it were to deteriorate or be lost completely. There is always the possibility that,

given the staff reductions, some analysts will be given additional coverage areas

that can negatively impact and dilute their ability to thoroughly cover a specific

market. It is also conceivable that the senior analyst responsible for a particular

coverage area could be reassigned to a different coverage area altogether - and a

very junior analyst could be assigned to cover their particular market. Either

scenario should raise a red flag for vendors in this market who utilize the firm's

services. At contract renewal time, these vendors should think twice about how they

might want to structure the contract and what products/services will be cost

effective and useful.

It is also important to monitor the impact of poor financial performance on an

analyst firm's prestige and influence with both its end-user clients and the media.

Vendors rely on the analyst's visibility and influence to help them gain the exposure

and credibility needed to win market share. If an analyst firm's influence and

prestige is damaged or diluted by poor financial performance and/or a reduction of

services offered, it will negatively affect the vendor's prestige and credibility. The

economic slump everyone is currently experiencing doesn't just impact the end-user

community and the technology vendors. It affects all parties, analysts included. Be

aware of how it impacts the influencers and thought leaders in your space and you

will be better able to cope with the changes.