Different types of customers need different kinds of services, and each business has its services for each type of customer. In a business-to-business setting, for example, a person could split their customers into different segments based on the type of business they do business with.
One of the most important aspects of business-to-business (B2B) eCommerce marketing is market segmentation. Segmentation is foundational to data-driven strategies that boost income, whether you’re selling goods or services. It helps you identify inefficiencies and seize new opportunities.
According to DemandGen, segmented campaigns outperformed non-segmented efforts regarding open rates (14.31% higher) and clicks (101% more).
B2B market segmentation fundamentals will be covered in this article. Segmentation, its forms, and its potential are explained. Capitalizing on segmented market possibilities and measuring post-implementation success is the focus. With this knowledge, organizations may create individualized strategies, perfect communication, and maximize market segmentation to boost long-term growth and revenue.
Explanation Of Customer Segmentation
B2B customer segmentation groups business-to-business (B2B) customers by shared traits or needs. Companies can learn more about their customers and tailor their offers to their demands.
Data about B2B consumers’ demographics, behaviors, demands, and preferences is needed to identify and target certain categories. Business-to-business (B2B) firms may split their clients by industry, company size, geography, and buying habits.
B2B companies can enhance their marketing and sales strategies, boost customer happiness and loyalty, and better meet customer needs by segmenting their consumers. Businesses can develop and succeed in a competitive industry with innovative B2B client segmentation support. To know more read about a successful eCommerce marketing strategy.
Five Approaches to Customer Segmentation
Although there is more than one way to divide up your target demographic, we have highlighted the six most common and fruitful approaches.
- Individual Requirements
- Classification of Customers
- Consumer Actions
- Customer Intelligence
- Nature of the Job
Approach 1 – Individual Requirements
Notify Visitors reports that 70% of marketers employ market segmentation.
Segmentation in business-to-business marketing that considers consumer needs divides consumers into several groups. They are looking for a solution to a particular issue or need. The fact that it is so simple to set up has earned it the reputation of being the most effective client segmentation approach. All you have to do is listen to inquiries to determine the primary motivations of your clients for calling you.
Some commonalities and requirements will surface. For instance, a business may want a local solicitor or a mailing provider to distribute letters nationally. For companies that can gather this information, it’s always a good idea.
The characteristics of a company that are used to group them are called firmographics. They are groups of people who are interested in business. Firmographics can be used to divide customers into groups based on things like company size, location, and industry.
Amount of money made, type of business, number of employees, and other things can be included. The goal is to separate companies into clear groups so that marketing efforts can be focused on the right ones.
This kind of information is usually easy for anyone to find and understand, so it’s not too expensive compared to other options for classification. For example, your marketing messages can have a more local feel if you divide them up by company area.
Approach 2- Classification of Customers
The foundation of this B2B marketing segmentation strategy is zeroing in on clients whose objectives align with your own. Customer importance can be ranked, and then aligned according to lifetime value, which is the ability to bring in business over time and how well they match your future goals.
After you identify the kind of company you’re targeting, you may tailor your marketing efforts to them. Consequently, you will be able to devote more resources to advertising to the 20% of clients that generate 80% of your income.
Parties such as consumer tiering and B2B marketing segmentation call for you to consider how essential your customers are to your net profit. Several companies use these calculations, which rely on machine learning and artificial intelligence, to determine their client tiers.
Online Dasher claims that a specialized campaign has the potential to boost income by 760%.
Approach 3 – Consumer Actions
By watching how your customers engage in the relationship with your product or service, you might learn a lot about their needs and how to meet them. This information can tell you how to communicate with your prospects better, which you can then use to come up with better solutions or even better yet upsells. Behavioral segmentation provides an opportunity to increase your knowledge about what your consumers do and how they interact with your service.
The procedure is often used to ensure that the identities of clients who can be mailed marketing materials are determined. There are some similarities with B2C marketing strategies. The advertising and marketing changes according to the actions and behavior of customers.
Approach 4 – Customer Intelligence
The consumer sophistication model is another instrument for business-to-business marketing segmentation. Some of this process is segmenting the market based on use or awareness levels when dealing with an issue that needs to be fixed.
Sophisticated consumers can have already purchased a solution to their problem from a competitor. In contrast, the unsophisticated ones may be new in this market, unaware of the issue, or unwilling to invest in an answer.
For each of these elements, separate channels of communication are necessary. For instance, the second group would require more information and guidance. Even though several business types can be categorized depending on their level/stage of existence or lifespan, such classification is made based on certain assumptions that are not always true.
Approach 5 – Nature of the Job
Businesses could gather information that is of exorbitant value, especially by studying the target customer base they want to sell their product or services with disposable income among some other things like willingness to pay. It allows companies to customize their marketing communications and strategies concerning customer segmentation.
For example, a business could separate its customers into two broad groups: giant corporations that have large budgets and startups with smaller budgets. However, though a product or service may have universal appeal across these groups, the marketing strategy and message would likely need to be tailored for each. It may strike a chord with small businesses that don’t have marketing as an internal department and lack the financial flexibility of big corporations.
First, segmenting and identifying important customer clusters makes it possible for businesses to create tailor-made value propositions, pricing templates, and sales presentations. This selective marketing allows for more effective spending and greater conversion.
Difference Between Market And Customer Segmentation
The basic purpose of both consumer and business market segmentation is to break down the larger market into smaller groups based on shared features. Market segmentation seeks to break down the general market into smaller sections that are assessed based on combined characteristics while customer segmentation aims to classify consumers using their unique idiosyncrasies and inclinations.
Market segmentation is crucial to the understanding and communication with various types of consumers by business. For instance, a vendor of clothes may group their target market into several subcategories based on age, income level, and family size. In contrast, geographic segmentation refers to the delineation of population density and delivery demand for a meal delivery app across cities.
For consumer segmentation, a business-to-business bookseller could use past purchases to create various segments of customers whereby they get appropriate recommendations and discounts.
Website behavior segmentation is related to customer’s preferences recommended to them. Secondly, loyalty program segmentation offered by a shop includes several tiers specific to spending and frequency but offers loyal customers special privileges that drive their repeat purchases. With these segmentation strategies, marketers can reach their audiences more effectively and interact with clients from different markets.
Why Is It Vital To Segment Customers for B2B?
Firms could benefit from various customer segmentation strategies to understand and better serve their customers. By categorizing consumers into smaller groups that share similar attributes or needs, businesses can better understand what consumers want and need. This helps them direct their marketing, R&D, and customer service efforts more effectively.
For businesses, client segmentation has several critical benefits. As an illustration:
By focusing on certain customer subsets, firms can develop sales and marketing that stimulate the customers and help them to get more conversions. Segmented, targeted, and triggered campaigns provide nearly 80% of marketing ROI, as reported by Sales Manago.
If companies try to understand their target customers, they can satisfy them and make them loyal to a brand better because the prospects usually have those products or services that can fulfill their desires.
Customer segmentation increases market share and gives a company an edge over competition. It helps companies understand customers, improve marketing and sales, and compete. All customer-centric strategies aim to identify each customer’s demands. This information can be utilized to create marketing campaigns, products, and services for all populations.
A customer-driven organization that serves underserved needs may use customer segmentation. These can boost customer loyalty, set the company apart from competitors, and secure future success. Customer-focused organizations can tailor marketing and sales methods to each age group by segmenting their clients. This can involve customizing promos and discounts for clients depending on their buying habits or using AI and ML to create personalized experiences.
Companies may boost consumer engagement with personalized experiences based on individual tastes and needs. Customer segmentation is critical for a customer-centric strategy to grow, delight, and keep customers in a dynamic market.
Customer Segmentation Best Practices in a B2B Business
Best practices in customer segmentation initiatives are also known to increase the chances of the success of the businesses. Here are a few examples:
Practice 1- Set your Business Goal
The first step of consumer segmentation must come with clear and well-defined objectives. Know what result is expected from customer segmentation and the benefits to the firm before starting the process.
If you do this, the segmentation effort will be more focused and consistent with your company’s intended goals.
Practice 2- Source Data
You need to use a variety of data sources and ways to learn more about different types of customers. A correct and dependable consumer group is made using data from many sources and different ways.
The information about how customers behave that you get from your website, social media, and other channels is studied. Other study methods, like focus groups and surveys, may also be used.
Practice 3- Select The Appropriate Criteria Of Segmentation
Your client base’s traits, goals, and aims should help you decide which segmentation criteria to use. There are important, relevant, and useful things you can use to figure out which groups are most likely to be interested in what you have to say.
Lastly, use more tests to confirm, improve, and perfect the validity and usefulness of your customer segments. You can make your segments more reliable and useful by adding more data and taking feedback from other sources, like customers or partners.
For instance, you can divide your customers into groups based on the type of business you run. It’s important to know what your B2B and B2C customers want if you have a Shopify shop that sells bulk items.
For your business-to-business (B2B) buyers, you can use a bulk order app for Shopify. The image below shows the interface of a third-party bulk app. A B2B wholesaler can install this app and let his customers buy a lot of products with just one click. The app also shows different versions, options, and a “in stock” badge.
Practice 4- Have the Appropriate Marketing and Sales Strategies.
It is crucial to use the information you gathered when defining your consumer segments to inform and guide your sales and marketing strategies. To implement this strategy, you can leverage segmentation data to individualize your communication with the customers and improve their experience through the brand or implement segment targeting in marketing and sales campaigns.
According to Sales Manage, 90% of businesses gain a better understanding of their consumers when they use personas, which can result in more growth-oriented campaigns and better targeting.
Problems with Customer Segmentation
Firms undertaking consumer segmentation should be aware of multiple potential threats. Here are a few potential problems:
Problem 1- Over-Segmentation
A challenge in consumer segmentation is over-segmenting which complicates manageability and efficiency in targeting each segment. This could lead to disorganization and a lack of clarity in your marketing and sales activities and weaken the efficiency of your segmentation strategy.
Problem 2- Under-segmentation
The creation of too few segments is also possible, making it harder to differentiate them and, as a result, to develop targeted sales and marketing strategies for each niche. A lack of personal customer relationships can result in a loss of customer loyalty.
Problem 3- Data Insufficiency
One more possible danger of consumer segmentation is using improper or insufficient information to determine segments. This can make you develop marketing and sales categories that don’t represent your customer base.
Problem 4 – The Misalignment with Business Goals and Objectives
You should also ensure that your efforts to segment your customers follow your company’s goals and objectives. Your segments will only perform marginally in boosting growth and success, much less if they are not directly related to your company goals.
Bottom Line
Many different kinds of B2B buyers exist worldwide, so treating them all the same won’t work. Market segmentation is the best way to let businesses find deep-seated value in their customers.
Breaking down your customer base and knowing their complex needs will give you access to a wealth of personalized strategies, targeted communication, and, in the end, huge sales. It’s important to remember that B2B market segmentation isn’t just a strategy anymore; it’s a way to grow your business. Turn on your analytics and get into segmentation, and you’ll see your B2B business soar to new heights.
