B2B market segmentation is the first step in a long journey of marketing efforts that must be accomplished for success to be achieved. Understanding your market is essential for the right marketing approach to be achieved. How can you effectively segment your markets to find a better approach?
It all begins by realizing that even two customers within the same niche market segment are going to have very different needs that must be met. There is no cookie cutter system of success that you’re going to be able to find. Segmentation must focus on each individual customer’s needs and the ability to satisfy those needs in a profitable way.
Same Business, Different Segments
The unique aspect of the B2B world is that the same business that you call a customer can fit into multiple market segments. An office supply company, for example, might segment the lower level managers that are usually responsible for ordering the paper clips, printer toner, and pencils. On the other hand, they might segment the entire business when it comes to the sale of a new POS system, office furniture, or IT equipment.
This uniqueness requires certain questions to be asked during the evaluation process.
- Should the company be segmented based on those who make the high value decisions?
- Should a company be segmented based on its specific industry?
- Is there one key decision maker that needs to be identified, and if so, should this person be the basis of the market segment?
- Who is the target audience that is present within the B2B customer be segmented?
As you can see, B2B market segmentation is a very complex process and can be quite the demanding task. What’s worse is that if you segment a customer improperly, you’ll never be able to maximize the incoming revenues from them.
Being Rational Happens More Than Being Emotional
Many marketers approach B2B and B2C market segmentation with the approach that a majority of all purchasing decisions will be based on emotions. In essences, sales are based on “wants” instead of “needs.” In the B2C world, wants are often purchased because most basic needs are food, water, clothing, and shelter. In the B2B world, however, needs are always met first and wants are hardly every on the table.
This makes it easy to segment businesses into specific categories because you can evaluate what your B2B customer needs and then drive in revenues by focusing on solving those needs. Subcategories, such as volume being purchased or the size of a company, can help to further define these rational and predictable market segments.
The reason why this is so important to do is the fact that the average B2B audience is going to be much smaller than the B2C audience. There are only going to be a few businesses that will make a regular presence on your sales list in the B2B world. It isn’t uncommon for 80% of an organization’s B2B revenues to be driven by fewer than a dozen companies. By segmenting this important businesses out and then meeting their needs, it becomes possible to dramatically influence sales.
If your focus is primarily on the other 20% that randomly comes around to make a sale here or there, then you’ll have less control over your bottom line. Even worse – your important customers might feel less important and take their business elsewhere.
Each Marketing Segment Must Be Valid
No matter how you segment your customers, the marketing segmentation that becomes the final evaluation must be valid. How can you determine if it is a valid segment? There are some specific questions you can ask yourself.
- Is this market segment different from my other market segments in a way that is meaningful?
- Have I created market segments that are large enough to have an impact on revenues.
- Is there ambiguity in the market segments so that multiple businesses may fit into multiple categories?
- Is it easy to classify each B2B customer into a specific market segment?
This is where the challenge of market segmentation happens to be. You have to focus on a specific area of a customer and then segment your marketing efforts based on that decision. For small businesses, that’s usually easy to do. You can segment the business or the contacts you have for that business because the presence is small. Small businesses are naturally built for relationship development and that’s a win/win for you and your customer.
For larger businesses, however, where multiple people may place multiple orders, segmenting the market can be difficult. Choose one area of focus in that instance, segment that focus, and you’ll be able to find more success. If you choose the wrong area of focus, then switch it up and choose another area. Just don’t target multiple segments unless you’re treating the single entities of a large business as multiple customers.
Market Segmentation Is More About Who Not to Target
Most marketing efforts are designed to be an outreach effort, but that shouldn’t be the case with your B2B market segmentation. It’s more important to determine which customers you don’t wish to contact because that is what is going to save you money. The same questions that reporters are supposed to act are the questions you’ll be answering with every marketing effort that is created: who, what, where, when, why, and how.
Grouping together your B2B customers based on how you’re able to satisfy their needs in a specific way is often the best way to approach marketing segmentation. Once you have segments together, you can examine the groupings and find common needs. Upon that common ground, an individualized approach based on your observations will help you create strategies that will help you meet specific metrics that may need to be met.
This is what marketing segmentation is so important. By segmenting your B2B customer base, you’ll be able to build more meaningful relationships. When that happens, you’ll have loyal customers that will always look to you first when they need what you have.