A targeted marketing strategy has the potential for generating far more revenue than a generalized mass marketing approach. However, proper targeting is contingent upon segmenting your audience into distinct groups that share the same needs or characteristics.
Effective marketing execution requires that segments be:
- Meaningful – based on important criteria that affects how you will sell to them
- Discrete – different from other groups in a meaningful way
- Sizeable – large enough to justify investing resources into developing a tailored approach
B2B market segments are typically more complex than B2C segments because they have more complicated purchasing systems and more people involved in making purchase decisions.
While a simple demographics-based approach might be sufficient for small-scale B2C segmentation, grouping organizations by superficial characteristics like company size or industry is ineffective because there can be so much variation across businesses that share these basic characteristics. This approach, known as firmographics, is a relatively useless model for segmenting B2B audiences at any level.
Rather than relying on firmographics, B2B segmentation should be based on actionable criteria such as:
Segmenting users based on which features are most important to them is a strong way to organize your marketing efforts. Usage-based segments are especially valuable in the B2B arena where products tend to be more complex.
Understanding how different segments of your overall audience will vary in their use of your product gives you a foundation for appealing to the elements that are most critical to them. It also provides a way to send targeted post-purchase communications when the features customers rely on are being upgraded or phased out, aiding in retention.
The best marketing campaigns throughout history have succeeded by offering a solution to a common problem.
B2B marketing is essentially B2C marketing in disguise because businesses are made up of employees (consumers) that are responsible for purchase decisions. These consumers have daily to-do lists, performance review objectives, and career goals to consider when offering purchase input.
Identifying pain points that consumers are looking to fix is a key strategy for boosting revenue. However, before you can solve a consumer’s problem, you must understand it. Furthermore, you need to recognize that one consumer’s problem can vary significantly from his/her peers. Segmenting consumers based on their short-term goals for using your products establishes clear way to appeal to these consumers by offering a remedy to their frustrating, time-consuming, and revenue-thwarting problems.
Consumers can also be segmented based on long-term goals. Targeted marketing that speaks to aspirational goals is positively correlated with increased initial sales as well as increased lifetime customer value.
Individual roles at a company will have different objectives when it comes to buying and using your products. The end-users may not be the ones responsible for making purchase decisions and even within the group tasked with making a purchase decision, different roles may have different priorities.
For example, a client-facing professional may want a software solution with the largest suite of features available, whereas this professional’s manager may be primarily interested in finding a solution that will not need to be upgraded or replaced within the next 5 years. This manager takes his/her employee’s suggestions and combines it with personal research to pass along a recommendation to the head of purchasing and procurement. Then, the person responsible for procurement may decide that the recommendation is too costly to fit into this quarter’s budget and choose to delay the purchase or ask that the manager reconsider all possible options to find a less expensive solution.
This is an example of how different roles influence purchase decisions, and why it is critical to segment leads by role to market to them more effectively. Understanding where consumers fit into the fabric of their company’s hierarchy gives you the insight into the resources and information they need to sway key decision-makers.
While B2B segments are far less focused on emotion, individual attitudes are still intertwined in the purchase process. More “rational” factors such as feature offerings and price can be influenced by the personal attitudes of the people tasked with researching and/or finalizing purchase decisions.
Consider the difference between consumers that understand their need for a product and are comparing available options versus consumers unaware that a product even exists that can solve their specific problems. Clearly, these consumers are at different points in the buying cycle, but they also have different opinions and emotions regarding their knowledge of the market. The first segment will have a far more open attitude towards being presented with options to fit their needs than the second segment who may be skeptical that a proper solution exists and more inclined to continue using their existing solution.
Getting accurate data regarding purchase attitudes is difficult, but surveys and other research methods can provide the insight needed to identify and organize segments by attitude.
- Buying Patterns
Segmenting existing customers based on how they buy and how often they buy provides a framework for timely and relevant marketing, especially for companies that only make major purchases quarterly or annually. Investing the time to design customized messages based on purchase history demonstrates to your audience that you care about their details of their specific purchases. It can also establish an ongoing revenue base by delivering important purchase-related information at the right time to encourage future purchases.
Organizations that already have the research and foresight needed to segment their business audiences can springboard into marketing planning and execution. However, most organizations need additional assistance knowing how to get to that stage.
Businesses that are new to segmentation should follow these four steps:
- Research Needs and Preferences
While surveys and formal market research can provide valuable data about purchase intentions, it cannot speak to the nuances of consumers’ needs and preferences the same way that a two-way dialogue can. Interacting with your audience through focus groups and one-on-one interviews can provide the juicy insights that your organization needs to effectively market to them.
Your customer-facing staff (sales, technical support, and customer service) can also supply anecdotal information that is unavailable through traditional research methods. Utilizing these in-house resources is a great way to leverage your existing assets and obtain buy-in across departments.
- Perform a Cluster Analysis
Once you have collected sufficient information from your research, identify segments using a cluster analysis. Group audiences and sub-audiences by similar characteristics that they share, which set them apart from other segments. (The segmentation criteria above are the most common ways to group your audiences, but they are not inclusive of all segmentation possibilities.)
- Prioritize Segments
With the segmentation step complete, prioritize your B2B segments by expected revenue potential or alignment with short and long-term business goals (such as expanding market reach or increasing market penetration).
- Develop a Unique Approach
Starting with your most important segments, develop a unique approach for marketing and selling to each segment. Remember that while marketing investments can furnish leads, the subsequent contribution to revenue cannot occur without a sales plan in place to nurture these leads and close the sale.
While segmentation is an effective strategy for increasing revenue, B2B segments are even more valuable than B2C segments because they have sticking power. The tendency for organizations to maintain their existing purchase processes and for staff to remain in their existing roles results in segments that evolve more slowly. Furthermore, the buying cycle is typically longer, and purchases are made less frequently. These factors combine to create resilient segments that do not change much year over year. This is positive news for B2B organizations that invest resources into segmenting their marketing efforts because it means that their investments will continue to pay dividends well into the future.