How focused (and actionable) is your B2B market segmentation?

Identifying the needs of your customers and satisfying them profitably, is at the heart of good marketing. Yet, I often hear statements like, “Our target market is C-suite in large businesses who’ll spend over £200k per annum on our product/service”.

The challenge with such broad targeting is that you’re treating a sizeable target audience as having the same needs. The problem with such broad segmentation is you end up doing very generic “blah, blah, blah” marketing that doesn’t speak to the needs of your ideal buyers.

Segmentation is the process of dividing your market into groups of customers and prospects with similar characteristics. It enables you to focus your limited marketing and sales resources on the most attractive segments and design marketing messages which appeal. Your ability to target particular customer groups with the right marketing mix (product, price, promotion, place) and messaging that resonates is wholly dependent on how well you segment your potential market.

According to The 4 Key Traits of Effective Buyer Segmentation, great buyer segments must be:

• Sizeable: a group that is big enough to matter
• Distinct: they are easily recognisable from other segments
• Durable: lasting long enough to affect your bottom line
• Actionable: easy-to-use, with recognizable benefits to sales and marketing.

But, even with this simple approach, many businesses struggle to segment their customers with more focus.

How to refine your B2B segmentation

Clear segmentation looks at three main elements:

• Who needs, wants and is willing to pay for your products or services
• What they have in common with each other
• Why they need and therefore would buy these services

The key is to really understand the different characteristics of your customers and prospects.  

There are many ways to segment your market:

1. Company characteristics (firmographics): which includes company size, service, sector or industry, longevity in their market, number of employees, annual revenue, budget, funding, organisation structure (do they have or lack certain job roles?), management structure and leadership style, purpose, values, goals and longer-term ambitions.

2. Decision makers’ characteristics (demographics): job role, level, career experience, age, skillset, surrounding team, personality, and background.

3. Values and aspirations (psychographics): personal opinions, background and approach to life.

4. Buying behaviours (behavioural): product use, adoption speed, loyalty to preferred suppliers, one partner versus many suppliers, their decision process (do they formally request to tender/for a quotation or select based on more informal pitches?) and their purchasing methods (do they buy products online with a card versus through a purchase order system and invoicing?)

5. Business needs (rational): typically this focuses on the problems your potential customers are looking to address, however, you do also need to look at the benefits to an individual as well as the company.

6. Buyer needs (rational and emotional): there’s more to B2B purchase decisions than business benefits. Purchasing decisions – even in a business context – are often made for emotional reasons. This is where attitudinal segmentation works best: grouping customers into target groups based on shared attitudes – what individuals think and how they feel. Attitudinal segments are useful because although two individuals may appear to be similar in terms of demographics and behaviour, they may hold very different attitudes to each other.

To make it work for your business, I believe needs-based segmentation is the best method because the whole purpose of marketing is about identifying, satisfying and meeting the needs of your customers, profitably. Once you expand your segmentation to include your customers’ rational and emotional needs, you’re able to design more relevant and engaging marketing.

The missing step: assessing the attractiveness

When you begin to define your segments, one key and often missed step is assessing attractiveness. You need to work out which will be profitable customers for your organisation – you don’t want to target revenue if you’re not getting high returns. After all, satisfying people’s needs and making a profit along the way is the purpose of marketing. You may find you have some highly profitable segments that are very small, maybe just a handful of customers. By segmenting these special customers you can create very focused marketing programmes.      

Next, you need to establish the segments’ propensity to purchase. Which will you easily be able to attract and win? Which will be harder work? You want to reach the people that want to choose you because you offer exactly what they need and want. But how can you distinguish between customers who you’ll easily attract and win versus those who will be hard work? That comes down to listening to your current client base about why they choose you.

Finally, you need to identify segments that have growth potential. That might be either in terms of profit or business development in a new direction.

Segmentation-Targeting-Positioning

Once you understand your market segments and the characteristics of each customer group, you can identify the most valuable segments to focus your limited marketing and sales resources on, and develop your product positioning and marketing mix to satisfy each segment effectively.

Only when you understand your customer’s needs and purchase motivations can you craft customer-focused propositions and marketing messaging that is relevant, engaging and persuasive.