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Best product doesn't always win, says Gartner

By Shannon Williams, Tue 7 Jun 2016
FYI, this story is more than a year old

Customer experience is proving a winning strategy, according to a new survey from Gartner, who says technology and service provider (TSP) CEOs are using innovation projects and leveraging digital business to drive growth through better engagement with customers.

The survey found that investment is being driven toward sales and customer-facing roles instead of toward new product development or cost-saving measures.

"Gartner has long believed that the best product doesn't always win and that many other factors contribute to success, especially a positive customer experience," explains Todd Berkowitz, research vice president at Gartner.

"Customer engagement received the highest investment from an innovation standpoint with 42% of TSP CEOs listing it as one of the top two priorities, ahead of new products and services and significantly ahead of internally focused activities,” he says.

Innovation spending is still being directed toward new products and services, but more often it is being directed to find new ways of engaging customers, which includes sales, marketing and customer success management efforts,” says Berkowitz.

"With only 5% of technology vendors very or extremely effective at differentiating themselves, differentiation continues to be a major issue for TSPs, and it's even harder when the differentiation is tied to product features and capabilities," Berkowitz explains.

"Superior customer engagement, which leads to a superior customer experience, can be a powerful source of differentiation, although only when based on real proof, versus simple claims,” he says.

According to Berkowitz, like all end-user CEOS, TSP CEOs believe digital business will be transformational to their business.

However, the survey showed that, when compared to all end-user CEOs, those from TSPs are more likely to believe that that digital would be impactful in allowing them to enter new markets and industries rather than just drive down costs and push more business through digital channels.

TSPs said that they are using digital business to create revenue/customer value (43% in top three expected outcomes) and cross-industry boundaries (40%) rather than reduce costs (33%) and drive more business through digital channels (30%).

“While TSP CEOs clearly view customer experience improvements as the single biggest factor in winning more deals, they see improving sales and marketing effectiveness as being more important in hitting future growth targets,” says Berkowitz.

The survey shows they are investing more heavily in sales and marketing than anywhere else, including customer experience or product development.

Sixty-two percent of survey respondents placed sales in their top three areas for investment and 51% had marketing in their top three, compared with only 37% for product development. CEOs are also investing more heavily in customer-facing roles to help hit those targets.

"For TSPs, long-term success, and even long-term survival requires continued innovation, embracing of new opportunities and responding to the changing needs of customers," Berkowitz explains.

"By innovating in areas outside of products and services and using digital to improve customer engagement and experience, TSPs can drive competitive advantages,” he says.

“In addition, by adapting sales and marketing strategies and continuing to invest in those areas, TSPs can more easily meet future growth targets."

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