The Importance of Market Segmentation In the B2B Industry

Over the years, we've done a lot of research into the importance of market segmentation. The general consensus is that segmenting the target market and finding different ways to communicate with each market segment helps business-to-consumer businesses increase their customer base and make more sales. We're convinced that the same is true for the business-to-business market. While market segmentation techniques may not be obvious, they pay off in the long run for B2B entities.

We've found that general marketing segmentation advice often applies more to B2C businesses than B2B businesses. B2C entities often segment based on demographic factors such as age and gender. When marketing to other businesses, it can be confusing to determine these factors.  However, we have found some ways to segment that work well for B2B entities.

WHAT IS MARKET SEGMENTATION?

First, let's be clear on what we're talking about. In any business,  there are various subgroups of ideal clients. For example, as Circle Research points out, many technology companies segment their customers into SMB (small and medium size businesses), Enterprise and Public Sector businesses. They then provide different information and advertisements to each type of business, based on that business type's needs and interests.

HOW MARKET SEGMENTATION APPLIES TO B2B ENTITIES

Many B2B entities segment by factors, such as business type, business size or business location. We've found this to be a good starting point, but it's also important to consider the following:

• You will probably have just a few segments. Since you're marketing directly to other businesses, you may not have a lot of different customer types. Don't expect to have more than five segments.
• Your segments will have unique pain points. B2B marketing needs to be based on demonstrating why your service will help support the business' interests.
• Sometimes individual businesses are their own segment. 80 percent of your revenue may come from 20 percent of your customers, so don't be surprised if some of your marketing is targeted towards one large business instead of six small ones.

Segment your market into various business types/sizes (or various businesses themselves!) and adjust your marketing messages when contacting each segment in order to get its attention and increase the likelihood of conversion to sales.

BEST PRACTICES FOR MARKET SEGMENTATION

We've found that the best way to approach market segmentation is to take some time to identify your segments, then come up with a plan. Begin by talking with sales people at your customers' businesses to find out what the business' features are -- its size, its location, its dominant way of doing business, and of course, its needs. Then, look through your database and sort your customers by those features.

Once you've identified your segments, we recommend creating a separate marketing plan for each segment. Start by asking yourself two questions:

1. What does this segment most need? Make a list of the segment's needs and how your business fulfills them.
2. What messages generate a response? Look at past marketing messages, sales by product/service and communications with customers to see what buzzwords and types of messages seem to generate the best response.

Create a marketing plan based on the following tips:

• Decide on the type and frequency of marketing messages. Some businesses respond better to direct mail than email marketing or better to event invites than to promotional emails. Similarly, some businesses may become irritated and tune out frequent messages while others appreciate them.
• Choose the content. Make a list of topics and themes that apply to each segment. Rely on your knowledge of which the segment tends to respond best to when making content decisions.
• Consider the tone. Depending on your segment, you may want to be more or less formal in your communications.
• Spend time crafting calls-to-action. Your call to action is the most important part of your marketing campaign because it gets decision makers moving! Use buzzwords that resonate with each segment to frame your call to action for that segment so that decision makers feel compelled to act right away.

In our experience, focusing on market segmentation is the best way for B2B entities to increase their sales numbers. By paying careful attention to each segment's features, needs and typical responses and crafting appropriate market messages based on those differences, you can reach new sales targets and expand your business.