Your Software Customers Need a Tailored Industry Approach

While verticalized marketing, sales, and solutions all positively affect outcomes, customers ascribe impact in different ways. Our survey finds that a verticalized sales team lifts deal size the most, while industry-specific marketing most affects sales velocity, and industry-specific solutions most improve consumption. (See Exhibit 1.)

Nonetheless, the most important aspect of verticalization to customers is expertise. Buyers want someone who speaks their language, understands their needs, and can adeptly explain how a vendor’s portfolio will solve the specific challenges of their industry. In fact, 76% of buyers indicate the importance of having sales teams and management who really understand their industry, and more than two-thirds say they find value in industry-specific solutions, engagement from industry experts, and “lighthouse” customer success stories in their buying process.

Generating better sales outcomes

Critically, the value of verticalization is obvious not just to buyers, but to sales teams as well. Throughout the selling process, companies can equip their sales teams with industry-specific materials, from solution details to pitch decks, as well as access to industry experts. Sellers find particular value from verticalized solutions and reference architectures, as well as having industry experts join sales calls. (See Exhibit 2.) The former indicates the advantage gained by software companies in directly addressing priority use cases and outcomes enabled by their technology, while the latter underscores the importance of an in-depth understanding of the issues and challenges of a customer’s industry.

In our research, 87% of sellers found value in industry experts joining sales calls. Sales and industry leaders at B2B software companies shared success stories from sellers that help explain why. For example, one B2B robotic process automation company included pharma experts on sales calls to explain how its bots could work with a large customer’s existing tools and precisely how they would add value. As a result, the deal size increased from 10 to 500 bots, and the seller closed the deal faster while displacing the incumbent competitor. Similarly, a communications vendor hired experts from the education sector who had experience and Rolodexes with large state university systems. The company shifted from selling to individual university campuses to closing systemwide deals ten-fold in size.

We also heard numerous other examples illustrating that the impact of verticalization spans the entire sales cycle—affecting deal size and deal velocity and creating a competitive edge. While sellers report the most value in deepening customer relationships and bolstering their own credibility, they also find meaningful benefits with respect to selling efficacy and improving deal outcomes such as consumption. (See Exhibit 3.)

To achieve these advantages, companies are building vertical-specific processes into their sales cycles. For instance, a data services company improved its quarterly business “success” reviews with customers in the banking sector by adding industry experts to ensure that customers were unlocking the full potential value and maximizing the consumption of the products they purchased. The engagement surfaced opportunities to upsell even more comprehensive solutions—enabling the company to expand its footprint by up to four times the size of the initial sale.

Typically, sellers at smaller, early-stage companies have the greatest top-line uplift potential from verticalization, with many experiencing 10% to 20% improvement in their win rates and the speed of their sales cycles. Meanwhile, larger, more mature companies see greater than 20% improvement in consumption and in cross-sell and attach rates, as well as in retention.

Capitalizing on the Opportunity

While there is clearly significant value to be realized through an industry strategy and go-to-market approach, verticalizing everything everywhere will not likely be a sound tactic. Instead, software companies need to thoughtfully choose the verticalization path that best suits their customers’ needs, ability to scale, and resources. Once they have defined their strategy, success will come from verticalizing to the right degree in each of the following areas:

• Sales. As mentioned before, to better connect with their customers’ decision makers, companies can have a pool of industry experts available to join sales calls; they can align their presales (business development, inside sales), field sales, and post-sales (customer success, professional services) vertically; and they can build industry-specific sales plays as well as value-engineering expertise.
• Marketing. Companies have the option of dipping their toes into industry-based marketing by adding a veneer onto their existing horizontal messaging and materials. But several successful companies have waded much deeper by investing in solutions marketing that targets specific industry use cases and highlights lighthouse customer examples.
• Product. Businesses must choose from a gamut of options to adjust and evolve their products to better fit in certain industries. These can range from developing industry-specific features in their current products to launching fully verticalized products or assembling a portfolio of solutions that combine vendor and partner IP.
• Ecosystem. Different types of partners in modern software ecosystems often have a very strong vertical focus. The right partnerships can be tremendous accelerators in verticalization for software vendors. This acceleration can come by working with existing partners’ industry-aligned go-to-market motions or by collaborating on vertical-specific solutions, such as independent software vendors (ISV) applications, to address individual customer use cases.

Apart from choosing the appropriate degree of verticalization, the journey could involve several additional steps, and care is needed to avoid common pitfalls, particularly for companies just beginning to verticalize. Some elements needed for success include the following:

1. Prioritize the appropriate industries. It can be tempting to tackle too many industries, but businesses risk diluting their efforts by stretching themselves too thin. Instead, they should target industries based on their business potential, the chance of consistent success, and the importance of a verticalized approach to customers. It is also critical to acknowledge differences across sub-sectors in an industry: what it takes to win and the size of the prize can be markedly different and require specific tailoring.
2. Identify high-value problems to solve in target verticals. Businesses should develop an understanding of the biggest pain points within each target vertical or sub-vertical that may be addressed by their solutions and then prioritize their efforts based on returns and scalability across customers. Companies that have verticalized successfully are disciplined and systematic in this use-case prioritization.
3. Invest in verticalized sales, marketing, products, and an ecosystem as needed. Once companies have identified the suitable level of verticalization in these four areas, it is critical to ensure an adequate level of investment. Success also requires establishing the right industry-based operating model with appropriate cross-functional coordination and accountabilities.
4. Expand the approach to other industries. After finding success in their prioritized industries, businesses should scale to additional industries. However, this is not a “rinse and repeat” of what worked in the initial efforts; care must be taken to identify the degree to which sales, marketing, products, and the ecosystem need to be verticalized for each new industry.

Technology buyers continue to face fundamental changes in their industries, and they expect software providers to demonstrate industry leadership to help them navigate. B2B technology providers have a major opportunity to build sustainable advantage through a clear, industry-focused approach; companies that ignore this trend risk eroding their relevance in the market. A winning verticalization effort will require more than just tinkering on the edges, but evidence suggests that the rewards at stake for companies that get this right are high.