Today’s B2B industry is all about personalized marketing strategies if you want to experience the real taste of success. Moreover, the B2B market covers a broad and diverse spectrum of companies, demanding to sell to different people differently.
Market segmentation or B2B customer segmentation allows businesses to tailor their marketing strategies and product offerings to the specific needs of each segment, thereby improving customer satisfaction and increasing sales.
Moreover, customer segmentation plays a crucial role in account-based marketing (ABM), which aims to personalize communication with key accounts. For instance, a B2B account-based marketing company might divide its extensive pool of potential customers into two or three distinct groups.
Customer segmentation is crucial for companies because it helps them to identify their most valuable customers and understand their unique needs and preferences. This, in turn, allows businesses to create targeted marketing campaigns, develop products and services that meet specific customer needs, and improve customer retention rates. By segmenting their customer base, B2B companies can identify new growth opportunities and optimize their sales and marketing efforts.
Let’s dig deeper into the various aspects of customer segmentation characteristics.
What is B2B Customer Segmentation?
Customer segmentation for B2B divides business customers into distinct groups based on shared characteristics, needs, and behaviors.
There are several types of customer segmentation used in B2B markets, including:
- Demographic segmentation
- Firmographic segmentation
- Behavioral segmentation
- Psychographic segmentation
This blog will cover the above points in detail in the following few sections.
Each customer segment has unique characteristics that can inform B2B companies’ marketing and sales strategies. For example, a segment of customers in the healthcare industry may have different needs and priorities than those in the finance industry.
Some common B2B customer segmentation characteristics include:
- Size of the company and revenue
- Purchase behavior
- Pain points and challenges
By understanding the unique characteristics of each customer segment, B2B companies can create targeted marketing campaigns, sales strategies, and customer service programs to engage and retain customers effectively.
B2B customer segmentation examples
The key is to identify the most relevant characteristics for your business and develop marketing strategies that resonate with each customer segment.
These are some of the B2B customer segmentation examples for your reference:
- Customer sophistication level
You filter your audience depending on certain nations or zip areas. McDonald’s, for instance, has stores worldwide and adapts its food and advertising to each country’s culture.
Men and women have distinct buying habits and consumer interests. Considering these distinctions, you must target various gender groups with appropriate products and experiences. In the case of email, gender-specific marketing enhances the click-through rate.
Customer sophistication level
In this type of B2B customer segmentation example, the level of business maturity is considered. For instance, a startup with few clients may not require a full-featured and pricey CRM system. Alternatively, they might utilize the accessible free tools.
Why is Customer Segmentation Important for B2B Marketers?
Customer segmentation is critical for B2B marketers because it enables them to understand the specific needs and preferences of different customer groups, allowing them to effectively tailor their marketing efforts to those groups. Here are some key reasons why customer segmentation is important for B2B marketers:
- Customization: Customer segmentation allows B2B marketers to customize their marketing communication to specific customer groups, improving the relevance and effectiveness of their marketing efforts. This can lead to increased conversions, engagement, and customer loyalty.
- Efficiency: By targeting specific customer segments, B2B marketers can focus their marketing resources on the areas most likely to generate the best results. This can result in more efficient use of time, money, and other resources.
- Better Understanding: Customer segmentation helps B2B marketers gain a better understanding of their customers, including their needs, preferences, and pain points. These insights can be used to develop new services and products that better meet the needs of specific customer groups.
- Higher Revenue: By tailoring marketing efforts to specific customer segments, B2B marketers can increase revenue by targeting the customers who are most likely to buy their products or services.
B2B Customer segmentation is essential for marketers because it helps them understand their customers better, customize their marketing messages, increase efficiency, and ultimately, drive higher revenue. But to avail of these benefits, every business needs to overcome a few challenges.
Customer Segmentation Challenges
While B2B customer segmentation has many benefits, such as improving marketing effectiveness and customer retention, it also presents several challenges. Here are some of the critical challenges of customer segmentation:
- Data quality: Customer segmentation requires accurate customer data, which can be challenging to collect, especially for small businesses. Poor data quality can lead to incorrect customer segmentation and ineffective marketing strategies.
- Limited resources: Segmenting customers requires time and resources, which may be limited for small businesses. Without adequate resources, companies may not be able to segment customers effectively.
- Lack of expertise: Customer segmentation requires expertise in data analysis and marketing. Small businesses may need access to these skills, making it challenging to develop effective segmentation strategies.
- Changing customer behavior: Customers’ needs, preferences, and behaviors can change quickly. As a result, customer segmentation may need to be updated frequently to remain relevant.
- Ethical concerns: Customer segmentation can raise ethical concerns if it involves collecting and using personal information without customers’ consent or using segmentation to discriminate against certain groups of customers.
What Are the Types of Customer Segmentation?
There are several models to take into account. Each of these segmentation patterns may give significant insights into the requirements, tastes, and behaviors of customers, allowing firms to customize their marketing tactics and increase customer satisfaction. Customer segmentation is on the same path as a B2B account based marketing strategy and follows the same tactics.
Let’s get to the details of the same each.
Demographic segmentation is a marketing strategy that divides a market into smaller groups based on demographic variables such as age, gender, income, education level, occupation, family size, and ethnicity. This approach enables companies to tailor their marketing efforts to specific groups of consumers with similar demographic characteristics and to develop products and services that meet the preferences and needs of those groups.
For example, Demographic segmentation may be used to target millennials or baby boomers with advertising and goods that suit their interests and lifestyles. This is one of the crucial, highly effective types of customer segmentation.
Geographic segmentation is dividing the market into geographical units based on regions, cities, nations, or neighborhoods. This approach enables businesses to identify new market opportunities and allocate resources more efficiently.
Geographic segmentation can be a powerful tool for businesses to understand their customers better and commence more effective marketing strategies. However, it is essential to consider other segmentation methods in combination with geographic segmentation to develop a comprehensive understanding of the target market.
The behavioral type of customer segmentation considers consumers’ patterns and preferences, as well as their purchasing habits and brand loyalty.
Behavioral segmentation incorporates several factors like customer benefits, product usage, brand loyalty, price sensitivity, and buy readiness. Marketers may target client needs and interests by researching these factors.
Behavioral segmentation helps discover loyal consumers and potential buyers’ requirements and preferences. This is one of the most prominent customer segment characteristics of this particular segmentation type.
Psychographic segmentation is a method of categorizing consumers based on their psychological attributes such as their personality traits, behaviors, convictions, and preferences. This approach centers on the internal aspects of consumers.
Psychographic segmentation uses surveys, interviews, and other approaches to study consumers’ psychological and behavioral traits. Marketers may use this data to construct buyer personas or customer profiles for different audience segments. These profiles help marketers meet segment requirements and want in message, product design, price, and distribution.
Psychographic segmentation has become increasingly popular as consumers demand more personalized and relevant marketing experiences. This approach creates more robust connections with their customers and increases customer loyalty.
Firmographic segmentation is done based on firmographics, which are the demographic characteristics of firms. Some common firmographic characteristics include industry, company size, location, revenue, and the number of employees. The cost to collect the data and use it for segmentation is relatively inexpensive.
B2B software companies may utilize firmographic segmentation to target small and medium-sized firms in a certain industry with a certain revenue range. The firm may boost its success and ROI by targeting this segment with its messaging and outreach.
Firmographic segmentation improves top-funnel marketing. Overall, Firmographic segmentation can help organizations enhance their marketing and success. Firmographically categorized clients benefit most from brand awareness and lead generation activities.
Needs-based segmentation is rooted in customers’ unique requirements and preferences, and companies must tailor their marketing efforts to meet those needs.
Marketers often begin needs-based segmentation by examining consumer data, such as demographics, psychographics, and behavioral trends. Then, they build marketing initiatives that directly address these underlying demands. This strategy gives the marketer the most precise means of targeting certain client categories. Because the marketer may define as many needs-based categories as desired, it is very scalable.
For instance, a corporation may segment its market by convenience and then provide fast, simple solutions. A corporation might also segment its market by luxury and manufacture high-end items to satisfy clients’ need for exclusivity and pleasure.
How to Do Customer Segmentation for the B2B Market?
You are now acquainted with several customer segmentation characteristics and are thus prepared to walk through the process of segmenting your market.
It boils through 3 basic steps:
Distinguish your Total Addressable Market (TAM)
Your TAM is the total revenue opportunity for a product or service and consists of all accounts that may find value in your solution if they begin utilizing it. You must segment your total addressable market (TAM) into a target market to effectively build and engage an audience.
Establishing a target market requires describing the qualities of your ICP. Which industry do you intend to serve? These characteristics will be advanced and frequently firmographic, but they will assist you in starting right.
Identify Target Account List (TAL)
Typically, the list of accounts in your target market still needs to be expanded to manage. This is where TAL development comes into play.
You likely already have a list of the strategic accounts you wish to sell to. With these accounts, you can establish your first TAL, which you can then expand to include a wider range of organizations representing your greatest chances.
Here are three strategies to broaden and improve your TAL:
- Further ideal customer profiling
- Predictive analytics tools
- Behavior-based targeting tools
Segment and prioritize your audiences
The last stage in segmenting the B2B market is to separate the target accounts from your TAL into audiences.
You can focus on account-specific target audiences by utilizing one or a combination of customer segmentation techniques. After you have created your audiences, you may rate them from high to low priority and develop unique materials for them based on their level of importance. Personalized one-to-many B2B account-based marketing campaigns may be effective for lower-priority clients.
B2B customer segmentation is a critical strategy for any business that operates in the B2B marketplace. Customer segmentation aims to create more targeted marketing campaigns, improve customer experiences, and increase customer satisfaction and loyalty.
B2B customer segmentation examples include segmenting by company size, industry, geographic location, product/service usage, and purchasing behavior.
Its importance cannot be overstated. By dividing your customer base into distinct segments, you can better understand their needs and preferences and build more targeted and personalized marketing campaigns. This can help you improve customer satisfaction, loyalty, and retention and ultimately drive more revenue for your business. Grow with us by connecting with our Binary Demand team of experts.
FAQs on B2B Customer Segmentation:
Q. What is external B2B market segmentation?
A. External B2B market segmentation is the process of dividing a business-to-business market into distinct groups of potential customers with similar needs or characteristics for the purpose of targeted marketing and sales strategies.
Q. What are customer segments?
A. Customer segments refer to groups of customers with similar characteristics, behaviors, and needs that the business targets for its products or services. Understanding customer segments helps businesses tailor their marketing and sales strategies.
Q. What is internal market segmentation?
A. Internal market segmentation refers to the process of dividing a company’s customer base into distinct subgroups based on shared characteristics such as behavior, needs, or demographics for more effective marketing strategies.