Global trends in software purchases in 2023
Translation of a presentation based on Gartner Digital Markets research. How do software buyers behave? How to sell your software to ISPs today - answers and practical recommendations in this material.
Practical insights into B2B buyer behavior and how software providers should adapt in this regard.
The material is a translation of a presentation based on Gartner Digital Markets research.
Foreword
Claire Alexander, vice president of brand portfolio and marketing at Gartner Digital Markets:
"As inflation nears an all-time high, there is no doubt that economic uncertainty is the biggest challenge for business in 2023.
Budgets are getting tighter, and executives are forced to decide how to do more with less.
What about the good news?
Businesses continue to invest in digital transformation to improve efficiency.
In 2023, nearly 70% of SMBs plan to spend more on technology and software than they did last year. Because the market is viable, sales and marketing leaders must invest wisely in growth or risk losing market share as the economy recovers.
But it's not always clear where to put your money, especially as buying behavior changes and marketers understand the buying process less and less.
That's why the Gartner team created the Global Software Buying Trends 2023 report to share information with software marketers that will help meet customer needs and create long-term customer relationships.
Gartner surveyed more than 1,500 CEOs from 5 countries about how they plan to prioritize, research and buy software in 2023.
Here are some key findings from the report:
- 68% of businesses are changing software more frequently than in 2021.
- 42% of buyers cite security as the most important factor when choosing new software
- 86% of buyers say that verified reviews are important or very important to evaluate and choose software. (Verified reviews influence software decisions)
The study will help you learn more about software buying trends in 2023 so you can adopt useful ideas and become a leader in your category."
Software market growth is a bright spot against the background of obstacles in the economy
Business leaders expected 2022 to be a period of economic restructuring. Instead, most had to adjust their strategies to mitigate inflationary pressures and recessionary risks.
Despite the global economic difficulties looming in 2023, growing companies are instead investing in digital technologies to improve operational efficiency rather than cut budgets.
According to a Gartner study, the software market is expected to grow 11 percent from 2022 to 2023 and is valued at $880 billion, making it the fastest-growing segment in the IT market.
The demand for software is driven by the fact that organizations want to address talent attraction issues to support hybrid or remote work formats and strengthen cybersecurity.
A growing business plans to invest in digital technology to improve operational efficiency.
Over the past two years, businesses have become more active in adopting technology. According to the survey, about 70% of companies plan to spend more on software in 2023 (compared to 2022). This is due to the fact that software tools are effective in helping to achieve goals.
Businesses understand that the best way to confront a volatile, uncertain, complex and ambiguous environment (VUCA) is to invest in digital transformation, but leaders will have to be strategic in their allocation of funds.
Security, helpdesk and analytics - the backbone of digital in 2023
More than half (55%) of companies have implemented IT architecture and security software in 2022, up from 46% in 2021.
Companies also purchased more help desk and IT support software (+11%) and business intelligence and analytics software (+12%) than in 2021.
This proves the importance that growing companies place on it:
- creating a solid and reliable foundation for digital processes,
- prioritizing support for employee productivity,
- tracking and analyzing business data to optimize performance.
The Software Buyer's Path
Software marketers lack understanding of the customer journey
At least 50% of the software buyer's journey is to go to independent, third-party sources of information - a blind spot for providers who seek to influence buyers' decisions.
To attract the attention of buyers and increase conversion rates, it is important to understand the needs and behaviors of buyers at every stage of the buying journey.
This report presents key findings about what buyers expect as they move through the six steps:
- dating
- reviewing
- Evaluation
- purchase decision
- product customization
- update
Marketing and sales professionals can use these findings to:
1) Determine where their current and potential customers are on their path to purchase;
2) Offer them the right information at the right time to win the hearts and minds of buyers at all stages.
Getting to Know You: Why Customers Start Looking for Software
The main motivation to buy the software is to increase productivity
Executives surveyed said they had purchased new software in the past 12 months to improve productivity (37%).
They were also looking for new software to address security and cyber attacks (30%), to expand their product range (27%) and to target new customer segments (26%).
Security is a priority for software buyers
When evaluating software options, most buyers (42%) prioritize security - even more than features and functionality - to make sure their data stays private.
Other factors that software buyers pay attention to:
- easy to use;
- features and functionality;
- cost (including license fees as well as miscellaneous costs such as maintenance);
- ability to integrate.
Key steps in the dating phase
Place your product in the category that best reflects your strengths to buyers
Collect feedback and case studies from your current users to show how their performance has improved.
2. Develop use cases that link your product features to buyers' business goals
Whether it's reducing processing time, improving communication or saving time on administrative tasks, you can increase interest and sales by targeting specific needs
Consideration: how buyers research and compare software
Buyers seek expert advice
The market of available software solutions is constantly growing, and it's easy for buyers to get lost in this multitude. To make sure they make a wise and informed choice, a third of surveyed companies (33%) seek advice from industry analysts and experts. However, this is not the only source of information.
Free consultations with analysts or software experts (29%), websites or journals of professional associations or trade associations (28%), discussions with peers (28%) and product testing (28%) also play an important role in the potential software review phase.
Customer feedback is most often used to short-list software
41% of the executives surveyed said that customer reviews and ratings play an important role in their decision to buy a particular software. Companies perceive customer reviews (41%) as an unbiased source about software quality, and use reviews to validate everything they've learned through searches.
In addition, customers attend individual product presentations (40%), study documentation, user manuals (39%), refer to online resources for training (37%), find out if there is technical support 36%.
Key actions during the review phase
Buyers seek information about software from both online and offline sources. Devote resources to improving presence, visibility on digital platforms. Such as search engines, software review sites and social media. Engage with potential customers via email and channels such as webinars and podcasts. By doing this you will increase the visibility of your brand and your offerer.
2. Add your software to the top known and highly rated services
Most companies turn to third party resources - software directories to check the ratings, read reviews, compare features. Make an effort to get on the Top of such directories, such as Capterra Shortlist, GetApp Category Leaders and Software Advice FrontRunners.
3. Run pay-per-click (PPC) campaigns on software comparison and review sites
Customers turn to third-party review sites to see which software will best meet their needs. Running PPC campaigns on these platforms is an effective way to generate leads that are ready to buy.
Evaluation: what buyers need to create a short list
Buyers are looking for verified reviews with quality comments
User reviews on the Internet are crucial for evaluating software because they provide "social approval" from other customers. But not all reviews are the same. Having verified, trustworthy reviews is important for most companies.
More than 50% of respondents benefit most from reviews that detail what users like or dislike about a product, while 46% prefer reviews with numerical ratings, such as the percentage of positive and negative reviews.
Buyers are most concerned about ease of use, safety and features
Ease of use (34%) and security (32%) are the main factors customers consider when choosing software, followed by product features and functionality (31%).
While price was the deciding factor in 2021, in 2023 security is expected to become paramount due to the increasing incidence of cyber attacks. According to Gartner research, more than 80 percent of ransomware attacks target organizations with fewer than 1,000 employees.
Buyers are looking for trust and flexibility when shortlisting software providers
When evaluating software providers, buyers evaluate the reliability of the sales department, the flexibility of the software provider to adapt to their buying processes, and the ability to integrate the software into their existing system.
In addition, 54% of respondents who bought software in the past 12 months preferred a custom solution to an off-the-shelf product, even if the former was more expensive.
The ability to personalize can strengthen your position in front of your customers and make the partnership more long-lasting.
Companies make faster purchasing decisions by evaluating more suppliers
While in 2021 most businesses (35%) needed 3 to 6 months to complete a software purchase, in 2022 that percentage increased to 47%.
As companies optimize and shorten the period from evaluation to purchase, they are exploring more and more options to find the right technology for them. On average, buyers typically look at five different software providers before making a final choice.
Key actions in the evaluation phase
If you don't have a review management strategy, you will lose potential customers. Because before they buy something, they read reviews. Ask customers to leave feedback on review sites.
2. Set up a strict system to collect and verify reviews
To increase buyer confidence, make sure you only collect reviews from real customers; not every review has to make it to the list. Set up IP validation and verification so that only genuine reviews are collected.
3. Offer product demos and free trials so that customers can explore the benefits of your software
To maximize conversion rates, focus on security, usability and reliability from the start - these are the aspects customers value the most. Also, train your customer-facing teams to make sure they understand the situation and the buyer's industry and offer customizations that are right for them.
Solution: what prevents buyers from coming to an agreement
Price mismatch is the main factor hindering a deal
A mismatch in price expectations is the main reason why a software vendor is excluded from the list of potential providers. This is followed by ambiguous or inconsistent information from software providers, followed by poor presentations or sales pitches.
In other words, if your prices are competitive, you can capture market share. Make sure that your sales and marketing materials are clear, concise and contain accurate information. Also, make sure that your sales team is attentive to customer needs, otherwise you risk losing out to your competitors.
The learning curve is the main barrier that stops a purchase halfway through
Nearly half of companies (45%) say that the learning curve or downtime (the time they spend learning the software) is their biggest problem when introducing new technology. Provide clear and concise training materials and ongoing tech support to reduce the time customers spend learning your software.
Concerns about return on investment in software (40%) and lack of budget (39%) are other obstacles to investment in software.
To convince potential customers, your software must demonstrate its value and show how it will save money over time.
The IT department has the greatest influence on the purchase decision
In 39% of the companies surveyed, between 4 and 6 employees are involved in the software purchasing process, and this number grows as the company grows. About 40% of respondents said that the IT department handles all technology needs in their companies. At the same time, technology purchasing groups are becoming more diverse, with users from various business units joining the process.
For most companies, technical stakeholders (41%) have the greatest influence on purchasing decisions, followed by an equal mix of economic (30%) and functional (29%) stakeholders in any given buyer group.
Technical stakeholders evaluate the software platform from a technical point of view, including its integration capabilities; economic stakeholders address budget issues; and functional stakeholders evaluate the usefulness of the software product for the end user.
Moreover, about half (49%) of the surveyed companies are dealing with technological problems at the expense of internal IT specialists. This suggests that the IT department is almost always involved in the process of purchasing new software.
Key actions at the decision-making stage
Use these resources to convince customers that they can adapt quickly. Show past implementation success stories to show how long it took customers to implement your software into their existing business processes.
2. Overcome buyer fears about return on investment by helping them create a compelling business case
Develop a business case for financial returns, KPIs the buyer is focused on, or a combination of both. This will help members of the procurement team easily get approval from senior executives on their chosen options.
3.Always respond to negative feedback
Remember that having negative feedback is helpful and builds trust, but too much negative feedback unanswered can alienate potential customers. Respond to negative feedback with sincere thanks and a promise to fix the problem in the future.
Product adaptation (onboarding): What customers expect after purchase
Communication is critical after the software purchase
Constant technical support is very important at this stage. The way they communicate with customers while they are adapting to the product leaves a lasting impression of the software provider's service. Almost half of respondents (47%) use chat and email to communicate with software providers after purchase.
Customers want support and training resources in their primary language
Most customers prefer to receive certain types of content in their primary language. 40% of survey respondents want support and guides in their native language, followed by software user interfaces (36%), communication with vendors (32%), and websites and landing pages (31%).
Key actions at the onboarding stage (adapting the client to the software)
Use the channels your customers prefer (such as chat, email and scheduled meetings) to support sales and keep in touch with them. Designate a product person for each customer in case of a sudden outage or failure. Your goal should be for customers to fully successfully use your software for their needs and continue to use it in the future.
2. Provide a holistic customer experience with multilingual support
Don't limit yourself to simply translating your website. Provide localized chatbots as well as training materials translated into multiple languages.
3.Launch a global feedback strategy to get customer feedback in local languages
Use proven marketing tools and tactics from Gartner Digital Markets to improve customer engagement in your feedback campaigns and connect with potential customers in your target countries.
Upgrade: Why customers replace or upgrade software
Buyers want to expand existing options
There is a growing trend among companies to regularly update current technology solutions. More than ⅔ of respondents (68%) have been replacing or modifying software more frequently since the beginning of 2021. This underscores how important it is for software vendors to offer customers a range of upgrade options.
In addition, the majority of respondents (55%) plan to expand their software license to manage more projects and tasks, while 50% plan to upgrade their software to increase functionality and 34% plan to increase the number of users.
Budget cuts lead to software replacement
In 2021, budget was not a major factor for software replacement, but in 2022 it became important: 36% of respondents cited budget cuts as the reason they replaced software.
Equally important reasons for replacement are concerns about software bugs, compatibility issues with existing programs, and the availability of better alternatives.
Key steps in the software upgrade phase
Use discounts, renewal options, additional products and other features to re-engage customers and increase their satisfaction. What's more, increase customer confidence after purchase, through ongoing support to help them take full advantage of your product and respond when their priorities change.
2.Use intent data to identify accounts at risk of churn
Use different types of customer intent data to identify dissatisfied customers, intervene early and retain them. This process will also help you analyze customer behavior to prevent potential losses.
An action plan for software providers
- Invest in the creation of software-specific leads
About 70% of companies plan to spend more on technology in 2023 to accelerate revenue growth. Spend your advertising budget on channels that are more likely to convert leads.
- Prioritize investing in lead generation in software markets like Capterra, GetApp and Software Advice to attract leads that convert 3 times more than Google Ads.
- Become known by promoting your software with pay-per-click (PPC) advertising or get personalized leads based on your personalized company profile, target customer profiles with pay per lead (PPL) programs.
2. use customer and competitor data to fine-tune sales and marketing
Companies are shortening the period from evaluation to purchase, but want to evaluate more software providers. Make sure your marketing team can identify and respond quickly to potential customers, and that your sales team has the information it needs to outperform the competition.
- Use customer intent data to determine where your potential customers are on their buying journey and engage them with the right content at the right time.
- Optimize your product profile on software rating and comparison sites to get on the short list.
3. Build a trusting relationship with your software customers
Customers trust online reviews just as much as they trust peer recommendations, and verified customer reviews are the content that most often make purchasing decisions.
- Launch an ongoing feedback strategy to gather social proof about your product and build software buyer trust.
- Learn how to use customer feedback to your advantage to enhance your brand reputation and improve your product roadmap.
Use content that emphasizes the features of the product that are most important to the buyer
When evaluating software options, most buyers look at security, ease of use, support, training, and ability to measure ROI. Make sure you use content in your marketing channels that emphasizes these key features.
- Highlight quotes from customer testimonials about valuable qualities of a product or service (e.g., customer support) on your website and other marketing channels.
- Create a high-conversion landing page to bring marketing-savvy leads to a product presentation that shows a clear interface and highlights key features and services for customers.
5. Maintain strong relationships with your customers
Compared to 2021, more than a third of businesses are more likely to change or replace software. Make sure you're paying close attention to customer feedback-including feedback on technical issues and business objectives-and giving them the support they need for reliable solutions in tough times.
- Use customer intent data to identify unsatisfied customers (who are ready to leave) and improve retention rates.
- Communicate with customers from around the world by providing support functions (chat, email) in different languages, and help customers measure their specific business outcomes.
Methodology
Gartner Digital Markets study on SMB software buying trends in 2023
The 2023 SMB Software Buying Trends Survey was conducted online from September through October 2022 among 1,513 respondents from the United States, the United Kingdom, Canada, Australia and France, among organizations with revenues under $1 billion and 2 to 999 employees in industries such as financial services, manufacturing, healthcare, IT, marketing and retail.
Respondents were screened for their involvement in software purchasing decisions, and those who were leaders/members of the group or had significant influence were allowed to participate in the study.
The survey was developed jointly by a team of Gartner analysts. The Gartner Research Data and Analytics (RDA) team reviewed, tested and administered the survey.
Disclamer: The results do not reflect global conclusions or the market as a whole, but reflect the sentiment of respondents and companies surveyed.
