B2B Marketing Segmentation and Targeting Strategies
Like snowflakes and fingerprints, no two businesses are exactly the same. Every business has its own particular personality traits that help to define who they are and the core values that drive their operations. As a business-to-business company, being able to identify those traits in your customer base is important, because it’s the first step in establishing your B2B market segmentation – which ensures that you are showing the right content to the right people in the right way.
What is market segmentation?
Market segmentation and targeting is defined, simply, as the categorization of your target audience based on their identifying characteristics. For companies that market directly to the individual consumer (business-to-consumer, or B2C), audience segmentation may be broken down by things like age, income, geographic location and behavior. B2B segmentation, however, is a little bit different because it requires the breakdown and categorization of entire businesses (which are typically made up of multiple decision makers and lots of moving pieces), rather than individual people. Some of the most relevant target segments for businesses include:
- Segmentation by firmographics. This is similar to the way you would think of demographics for individuals but takes into account certain aspects of a business, including its industry, location and how new or established it is.
- Segmentation by size. The size of the company can refer to its total sales revenue and/or the number of employees it has.
- Segmentation by customer. This refers to the breakdown of your customers’ customers. Who are your customers targeting with their own products and services?
- Segmentation by behavior. In this case, behavior refers to your customers’ buying habits: how often they buy, whether they buy online or in person, the extent of their brand loyalty, etc.
Importance of market segmentation
Ultimately, your customer segmentation strategy is all about the profitable fulfillment of your clients’ needs. In other words, by splitting up your target audience into distinct groups with distinct needs, you can allocate your marketing resources more appropriately for a better return on your investment. Rather than wasting your marketing dollars trying to reach an audience that is too broad to produce real profitable results, B2B market segmentation forces you to: 1. take a closer look at your audience, and 2. appeal to the needs of each segment individually. The goal is to ensure that your marketing dollars are being spent wisely by putting the appropriate messages in front of the appropriate people. (B2B segmentation also makes you think about where you don’t want to sell, and encourages you to put aside those businesses that aren’t a real target for your business offerings.)
As such, the benefits of marketing segmentation are vast and include the following five advantages in particular:
- An improved campaign performance. When you tailor your messaging to a focused audience, you may reach a smaller population overall, but your probability of conversion is much higher than if you were to market to a broader base.
- More informed product development. By doing a deep dive into the wants, needs and characteristics of your customer base, you may be able to identify new areas of your business that you can develop – or redevelop – to serve your audience better.
- Uncovering where there is room for expansion. Now that you know exactly who your audience is, are there any niche groups that heretofore have been untapped?
- An improved business focus. If, to this point, you’ve been trying to appeal to everyone, your attempt at target market segmentation can give you a chance to identify ways in which you can refine your brand and your focus.
- More informed business decisions outside of marketing. Your segmentation strategy will give you a clearer picture of how your customers respond to your pricing and distribution practices, which, in turn, will give you the opportunity to tweak your operations as needed.
An example of market segmentation strategies
Below is a simplistic customer segmentation strategy example. Although it is basic, it illustrates quite clearly how market segmentation works, and why it’s so effective.
First, let’s say you are the owner of a company that manufactures car steering wheels. You have been marketing your product to every car company across the globe, and you’ve established a pretty good reach. But now you have a new product you’re about to roll out – a steering wheel designed exclusively for high-end SUVs – and a $1,000 marketing budget to go with it, which we’ll assume is enough to reach 10 car companies. You recognize that there is little need to market this product to economy car companies, or companies that don’t make SUVs, so you segment your audience in two ways:
- High-end versus economy car companies
- Car companies that manufacture SUVs versus those that don’t
By weeding out the lower-end companies and the ones that do not manufacture SUVs, you avoid wasting a portion of your resources on companies that have no need for your product. Instead, that entire $1,000 goes toward putting your product in front of 10 car companies that are all relevant to your product and, in turn, increases your probability of converting a sale.
Still have questions? Reach out to our marketing team today, and we’ll help you develop a customer segmentation strategy to get the most out of your marketing budget.