Everything you need to know about B2B Marketing Segmentation

The process of grouping or splitting your prospects and potential customers into recognisable groups is known as B2B marketing segmentation. Segmentation is an important practice for B2B companies who are serious about providing real value to their customers, improving sales conversion rates and providing a better, more personalised experience as well as increasing revenues. 

The Importance of B2B Segmentation

Every company wants something slightly different from a B2B relationship. One of the basic rules of marketing is to sell to different people in different ways. There is often no one size fits all in B2B marketing as customer needs are always quite varied - especially if you have a product with multiple functionalities or are selling a complex service. What works for one customer won’t work for another, and therefore, segmentation plays a large role in the success of business to business sales and marketing. It should form the basis of how we communicate with customers. 

If you have a clear strategy in place, your B2B marketing segmentation will help you to target the right customers and cater to their requirements in a way that is specific, measurable, achievable, realistic and efficient. Segmentation benefits both your company and satisfies the customer. Some of the biggest benefits in B2B marketing segmentation include the following:

  • A boost in profit. When you provide value for your customers, you earn money as a result. By segmenting your audience, you should be able to better communicate that your product or service will satisfy the specific needs of your customers, resulting in increased sales and profits.

  • Cutting costs. There’s nothing much better for a business than adding revenue while cutting costs, and B2B marketing segmentation can ensure that you create campaigns that are personal to your customers. This means that you will have a greater return on your advertising or marketing investment due to reduced wastage.
     

  • Improved product development. By segmenting your audience, you’ll begin to gain a deeper understanding of your customers and what they need which can be fed into ongoing product development. Positioning your product or service differently for each customer segment will enable you to develop your products to the requirements of your customers, providing them with greater value.

  • A better, more personalised customer experience. Your customers deserve the best and when you deliver solutions that are relevant to your customers, you’re delivering value. Enhancing your customer experience with B2B marketing segmentation is the key to developing great relationships with your customers. 

Segmentation stats

Mailchimp, a leading email marketing platform, carried out an experiment which involved comparing segmented marketing campaigns with non segmented campaigns across a total of 18 million email recipients. The results of segmentation and personalisation were compelling:

  • Segmented email campaigns saw 14.3% higher open rates. 

  • Click-through rates doubled.

  • Bounce rates were 4.6% lower.

  • The number of unsubscribes was 9.4% lower.

This highlights the importance of segmentation and the benefits it can bring to your business. 

Everything you need to know about B2B Marketing Segmentation

An Example of Market Segmentation

Consider SEO (search engine optimisation) services - or indeed, any digital marketing service. We can demonstrate market segmentation in how the service is sold. There are often two types of SEO enquiry. The first is a company that needs an experienced SEO professional to physically carry out the tasks necessary to grow organic traffic on the site, from content creation, to link outreach to metadata optimisation. These companies simply don’t have the resources to do this in house to grow their organic traffic, and so they are effectively sourcing the resources from elsewhere.

Alternatively, you may have an enquiry from a company who have resources in house to take on SEO tasks but need an experienced consultant to train, teach and give feedback to staff members.

Effectively, both companies have the same goal - to increase organic visibility, leads and sales, however, the needs of the two companies are slightly different. They would belong in two different segments as you would need to speak to each company in a slightly different way and package up your SEO services differently. 

One of the basic rules of marketing is to sell to different people in different ways. ”

Six Ways To Segment Your Audience

There are a number of ways that your audience can be segmented, however, we’ve outlined the six most popular / effective ways of segmenting your audience. 

Needs Based

This is the type of B2B marketing segmentation that categorises customers into groups based on what they are seeking in a product or service. They have a specific need or problem and are looking for a way to fulfill this need. It’s known to be the most powerful customer segmentation method as it’s fairly easy to establish. You’ll simply need to listen to enquiries and find out the main reasons why your customers had picked up the phone in the first place. Common themes and needs will emerge, for example, a company has a need for a mailing service that can send their mail nationally, or they may have a need for a local solicitor. It’s always recommended for businesses that have the ability to collect this data. 

Firmographics

Firmographics are a set of characteristics used to categorise companies. They’re essentially demographics but for businesses. Firmographics can segment customer groups that are based on statistics like the size of the business, the location and industry. This can also include revenue, industry, number of people working in the business and so on. The aim here is to identify specific types of businesses and then market to them accordingly. 

This is a fairly inexpensive form of segmentation in comparison to other options on the market as this information is almost always publicly available and the information isn't too hard to understand. By segmenting by company location for example, you can add an element of local targeting to your marketing messaging. 

Customer Tiering

This method of B2B marketing segmentation is based on finding and focussing on customers that match your business goals. Your customers can be ranked based on their importance to your business, and you can align them by lifetime value, or rather the potential to bring in business over time / how well they match your goals in the future. You can then build a profile around this type of business and market to them accordingly. This way, you can spend more time marketing to 20% of companies that are responsible for 80% of your revenue. 

Key accounts B2B marketing segmentation is similar to customer tiering as you’ll need to consider how important your customers are to the bottom line. There are some firms that use machine learning and artificial intelligence to calculate these values and create a range of customer tiers based on these methods.

Customer Behavior

If you can monitor the way in which your customers interact with your product or service, you can then establish communication entry points or touchpoints that you can use to provide the customer with a better solution to their problem or decide whether you can upsell based on their needs. Behavioral segmentation can help you to gather data on the behavior or relationship that your customers have with your product or service.

It’s often the method used to ensure that you can identify customers to contact with marketing materials. This draws some parallels with B2C marketing, with ‘Customers also ordered’ type messaging as well as marketing that is responsive to customer activity and behvaiour. 

Customer Sophistication

Another method of B2B marketing segmentation is the customer sophistication model. This involves dividing the target audience based on the extent in which they use / know of the problem to be solved. For example ‘sophisticated customers’ may already be investing in a solution for their problem with a competitor but an ‘unsophisticated customer’ may be new to the market, unaware of the problem or not ready to invest in a solution.

Both of these segments will need to be communicated in different ways. For example, the latter segment may need more in the way of education and information. Companies can be segmented by the maturity or business lifecycle, however, this brings assumptions that may not necessarily be true. 

Job Type

Targeting based on individuals in business can often give businesses an idea of budgets and therefore find out whether it is worth pursuing a particular customer. This can also help to establish and tailor the language to use in marketing communications for each job type. For example, you may have a segment for companies who have a marketing manager vs companies in which the owner takes on these responsibilities. The latter is usually a younger business that doesn’t have the financial resources or budgets to invest in your offering. Or perhaps you have a different product for this type of business in comparison to a large business with marketing budgets and teams. 

How B2B Marketing Segmentation Can Help To Achieve Personalisation

While B2B marketing segmentation is simple in essence, it doesn't mean that it’s easy to achieve all the time. In fact, there are many things that can get in the way of you completing meaningful market segmentation in the business to business arena. This is the unfortunate part: putting things into place from business to business takes time and a lot of research, and you have to be ready to take it on if you want to segment your business correctly. We’ve three steps to effective B2B segmentation below: 

  1. Get to Know Your Customers

The most important piece of the puzzle in B2B marketing segmentation is the customer. Without them and their input, you’ll be missing out on key decision making information. You need to know who your customer is, why they became a customer with you in the first place and what problems they are looking to solve with your business. The most important thing that you can do is get to know your customer so that you can figure out the segments and translate this into a clear marketing plan, with personalisation for each segment.

  1. Categorise The Customers


The next step is the creation of ideal customer profiles so that you can get a clear picture of the different types of customers you sell to as well as understand their individual needs. 

  1. Create Individual Marketing Messages

Once you have got to know your customers and categorised them, you can then work to create individual marketing messages that are based on your customer needs. For example, you can segment your email database and email offerings based on the needs of each segment. Personalisation is so important with regards to providing value to your customers and creating a personal, meaningful customer experience. 

How B2B Segmentation Differs from B2C Segmentation 

There are many ways that B2B marketing segmentation differentiates from business to consumer segmentation: 

  1. There are more decision makers in B2B markets. You have to get through more than one decision maker in the B2B market. In B2C, you’re going directly to the customer who makes the purchasing decisions. It’s also possible that you can have a network of multiple purchasers in the business arena and you have to get sign off from them all. 

  2. Product complexity - Selling a product from one business to another can often be more complex than selling a product directly to the consumer. 

  3. Needs rather than emotion - There’s a rational process. When you market to a business, the process of whether they’re going to buy the product you offer is more straightforward and is based on needs rather than emotion.

  4. Long term product usage - There is a different buying cycle comparing B2B with B2C. B2B purchases tend to be more than a one-off purchase. They are often long term and they have the possibility to repeat their custom. 

  5. B2B audiences are smaller. B2C audiences are usually transient and plentiful however, you might sell to a B2B customer just once. The target audience is much smaller in the B2B sphere.

  6. It’s personal. B2B sales involve negotiation, face to face interaction, personal conversations and more. Choosing the customers to get the personal service is important if you want to get the correct outcome.

If you're looking to segment your audience and establish how to market to each segment, get in touch with Tiga B2B Marketing Agency today.