What is market segmentation?

Market segmentation is a marketing technique that involves dividing your target market into smaller groups or segments based on their shared characteristics. In doing so, you should gain a better understanding of your customer’s needs so you can create more effective marketing strategies to appeal to them.

With 77% of marketing ROI coming from segmented, targeted and triggered campaigns, segmenting your audience into smaller groups allows you to identify their unique needs and create messaging that is relevant to them. 

By categorising your customers into groups, you can tailor your products and marketing methods according to their needs and preferences. Doing so can improve customer experience and encourage your customers to return to you in the future. 

How is B2B market segmentation different from normal market segmentation?

As a B2B marketer, you may be wondering how you go about segmenting your customers when your target market is other businesses. B2B and B2C segmentation work in similar ways but can have different processes. Both involve identifying target markets and segmenting them into groups. However, due to the nature of B2B having longer sales cycles and buyers who are more knowledgeable about the buying process, B2B segmentation can be more complex.

B2B market segmentation is different from normal market segmentation because of the following factors:

• Decision-makers: Businesses usually require approval from various stakeholders before choosing to do business with you. Whereas with B2C, consumers tend to decide whether to buy on their own. With B2B, it’s important to make sure all decision-makers are considered in your segmentation groups.
• Business’ needs: Customers buy what they want whereas businesses tend to focus on what they need and how your service or product can help their business to grow. B2B buyers are often more rational with their buying decisions. 
• The buyer’s journey: The B2B buyer’s journey can be longer than B2C. It may take months or even years for a business to make their purchase. 
• Personal relationships: With B2B audiences, you’re likely to speak directly with your buyer which means stronger customer relationships are a priority. The relationship the business builds with you can influence their purchasing decisions. 

What are the challenges of B2B market segmentation? 

Segmenting your B2B audience poses several challenges when compared to B2C market segmentation. To overcome these challenges it’s important to engage with your customers and have relevant data at hand to adapt your segmentation models where needed. 

Here are just some of the challenges you should consider when approaching B2B market segmentation:

Complex decision-making process

As mentioned, B2B purchases often have a complex decision-making process which involves multiple stakeholders and individuals with different levels of authority. Whereas consumer market decisions are usually made by one or several individuals. This can make it difficult to identify exactly who is the target buyer for B2B and who should be included in the market segmentation process. To do so, you’ll need to identify and understand the role and priorities of each individual within your buyer’s organisation and their needs and values.

Limited data

Gaining access to your customer data and analytics can be more challenging when it comes to B2B customers. B2B transactions may contain confidential information or have limited public records, which can make it complicated for you to gain accurate and complete data to use in the segmentation process. 

Longer sales cycles

Sales cycles for B2B tend to be longer and contain multiple touchpoints and interactions, which can be complicated to keep track of. Segmenting customers across this cycle can be complex and their needs may change throughout the buying process. 

Mapping the customer journey can be a great way to understand the sales cycle of your B2B customer. Their journey won’t always be linear and can often span several touchpoints and interactions before they decide to buy. First, identify your customer touchpoints (the interactions they have with your brand) and from there you can map their customer journey from pre-sale to post-sale to help you analyse and understand their customer experience. 

The business environment

B2B markets are always evolving and can be subject to industry trends, competition, and regulatory environments - if they work in the finance space, for example, they may need to adhere to FCA regulations, which can affect their purchasing decisions. To ensure your market segmentation models are relevant and effective, you’ll need to continuously monitor the industry your customer works in for any changes that could affect their buyers’ journey or needs, and adapt your market segmentation accordingly. 

What is the value of B2B market segmentation?

When you think about it, there are three boxes you want to tick when running a business:

1. Having a product or service that solves the customer’s problem
2. Knowing who needs that solution
3. Standing out against your competitors

One way to meet these objectives is through market segmentation. Without it, you could risk treating each of your customers the same way, which won’t connect with them.

B2B market segmentation allows you to understand your customers on a deeper level so you can tailor your content and marketing to their unique needs and preferences. You’ll then be able to create targeted campaigns aimed at each segmented group that resonates with them and will encourage them to convert.

Here are just some of the benefits of B2B market segmentation:

• Personalised experience: By segmenting your customers into groups based on their shared characteristics, you’ll know what they value and need and can offer them a personalised experience. This will also improve customer loyalty and retention as your customers will feel valued and understood. 
• Product optimisation: Segmenting your customers into groups allows you to identify their needs and how they respond to your product or service. You can then make changes to your existing products or develop a new line of products to appeal to each group.
• Targeted marketing: By dividing your B2B market into segments you can tailor your marketing efforts to a specific customer group. This allows for more personalised messaging and relevant marketing campaigns.
• Competitive advantage: Market segmentation can offer your business a competitive edge. It allows you to understand the needs and preferences of different customer segments so you can develop specific products, services and marketing campaigns that resonate with these customers. This can help you stand out against your competitors and boost your customer loyalty.
• Customer retention: B2B market segmentation can help you develop a strong retention strategy. You can identify segments that have the potential for customer retention and focus on nurturing those relationships to encourage them to remain loyal to your brand and recommend you to their network. 
• Enhanced customer service: By segmenting your customers into specific groups based on their preferences, you can identify what they value most from their customer service experience, and how best to communicate with them. 

How market segmentation can help your marketing

The key to business growth is truly understanding your customers. Whether you’re serving consumers or other businesses, market segmentation can help you better target your products or services to meet your customers’ needs. Without it, you’ll end up developing one strategy for all target markets which won’t appeal to everyone. 

Market segmentation can give your marketing the boost it needs to resonate with your customers and encourage them to purchase from you again in the future. When it comes to B2B market segmentation, this process can help you to identify the needs, buying motives and preferences of your customers so you can create marketing strategies that appeal to each group. It can also ensure your marketing communications are relevant and resonate with your target audience to address their pain points, challenges and values.

How to get started with B2B market segmentation

So, we’ve covered the benefits of B2B market segmentation for your business and customers. Next, you’ll need to put a plan together for how to get started with your segmentation process.

Unlike B2C market segmentation, where you would group your customers by factors like demographic, behaviour and geographic location, market segmentation for B2B works differently, as you’re appealing to businesses rather than individuals.

Here, we’ll provide B2B market segmentation examples for you to explore:

• Firmographics: Firmographics covers the characteristics used to segment different organisations. As the name may suggest, they’re essentially demographics but for businesses. Key firmographics to explore include industry, company size and location. 
• Customer needs: This approach groups your customers by what they need from your product or service, so you can identify their pain points. From there, you can create campaigns that are targeted at specific customer needs, such as businesses that are ‘growth focused’ or ‘environmentally conscious’ rather than grouping them by industry, for example. To ensure accuracy, you could interview your customers about their needs and values.
• Behaviour-based segmentation: As the name suggests, this method looks at how your customer acts and behaves, rather than what they need or want. Data plays a large role in this method as you’ll need to explore how your customer is interacting with your content and social channels, as well as the technology they use. Behavioural segmentation aims to offer insight into what your customer wants and why they make their decisions.
• Tiering/profitability: Tiering or profitability segmentation dives into the potential value of a lead and ranks customers by their importance to your business. This importance could be defined by their profitability for your business, their lifetime value or how they align with your business’ goals. 
• Customer sophistication: We’re not saying to group your customers on whether they sell champagne! Instead, customer sophistication segments companies by their business maturity and knowledge - how well they can judge the quality of your product or service. For example, less sophisticated customers may need a basic version of your pitch whereas more sophisticated customers will likely know more about the industry and your product and will require a more in-depth pitch. 

While B2B market segmentation may sound more complex than segmentation for B2C, it’s the key to creating relevant marketing and messaging that will resonate with each group of customers, which can lead to higher conversion rates and improved customer retention too.