The key to B2B success is discovering the perfect audience to build your customer base. The challenging part of it is being able to build that customer base for your B2B business. That is why today’s focus will be on customer segmentation.
According to a ReadWrite blog, 77% of return-on-investment campaigns come from targeted segmentation of customers.
So clearly, customer segmentation is really important for B2B success. But customer segmentation is not without its challenges. That is why this article will be about overcoming challenges in B2B customer segmentation. The discussion will focus on what is customer segmentation and its importance, the challenges for B2B businesses, and how you can overcome them with the right customer segmentation strategies.
Customer Segmentation – Why It Is Important For B2B
So what really is customer segmentation? Think of it as putting your customers into different categories. It can be based on the type of business they are or their geographic location which you can divide them into. You can also categorize your customers based on their buying habits.
Customer segmentation is important because not all your customers are the same. This is even more important for B2B because different clients need to be handled differently. If you don’t know which segment a particular customer or client is in, it becomes increasingly difficult to manage the customers for your store.
So let’s take a closer look at why customer segmentation is important for B2B businesses:
More Efficient Marketing
When you know your customer segments, you know how to target them individually. Personalized marketing is how you can ensure individual customer satisfaction. With customer segmentation, it is much easier to target those customers with efficient marketing strategies. More efficient marketing will make use of existing resources much better.
Less Cost And Increased Revenue
With efficient marketing comes fewer costs needed for marketing to customers. This is what customer segmentation allows for your B2B business. Less marketing costs lead to increased revenue chances. With the right data analysis of your customers, your B2B business can boost sales and increase revenue. Read this to know about “B2B Segmentation Strategies”
Better Customer Experience
As I have mentioned earlier marketing becomes more efficient with customer segmentation. Another important aspect of that is your B2B business can give a better customer experience. When you can segment your customers.
Growing Your Business With New Products And Services
When you know how to target your segmented customers, it increases your business’s scope to grow and expand your business. With customer segmentation, you can find out where exactly your customers’ pain points are and fulfill them with better products in the future. B2B customers are usually long-term buyers so proper segmentation helps both your business and customers.
5 Major Challenges In B2B Customer Segmentation
We have seen the importance of customer segmentation, but just doing customer segmentation is not enough. There are many challenges in doing proper customer segmentation, especially for B2B businesses. Here are the challenges to B2B customer segmentation:
Challenge #1 Multiple Decision-Makers To Segment
In a B2C business, you are dealing with one person. But in B2B, you have to deal with many decision-makers. B2B customers have to go through many channels before finalizing the purchase so it becomes difficult exactly who you are trying to segment.
The hierarchy of decision-makers in your client’s business makes it even more complicated. You have to fulfill all their criteria before a deal can be finalized. Otherwise, it increases customer acquisition costs for your company when you are trying to get new customers.
Challenge #2 Complex B2B Products And Longer Purchase Finalizing
Because there are so many decision-makers, it takes a long time to finalize the purchase in a B2B business. It might take your clients months as they are trying to go through the process of vetting your competitors.
This makes B2B customer segmentation even more difficult because you have to plan for the long run. And in doing so, there are times when the deals can be canceled midway through. That is why the longer purchase period makes it difficult to segment your B2B customers properly.
This complexity in customer segmentation is not helped by B2B products and services being a bit more complex than other products. For example, if you are a SaaS company, your clients might not understand why they need your product. Or, they might not understand why your product is better for them than other competitors. Similarly, if you are in the wholesale ecommerce business, clients might not fully understand how your product is better than the rest. That is what makes it difficult to efficiently segment B2B customers.
Challenge #3 Smaller Target Audience And Overlapping Segmentation
Another very challenging part of B2B customer segmentation is the smaller target audience that you have to deal with. Smaller might seem easier to segment, but the limitation is the data available. A larger target audience yields more data that you can do proper analysis on the whole market. However, the smaller audience leads to a low volume of data available to accurately segment customers properly.
If the smaller target audience is not challenging enough, overlapping segmentation is where it becomes a big headache for B2B businesses. Every client needs to be handled differently in a B2B business. However due to a smaller audience, there are chances that your business might have segmented a client in with your other clients.
This can be due to the lack of data available for proper customer analysis. Two different clients in the same segment will not respond the same way to your marketing strategy. So overall, overlapping segmentation is a big challenge.
Challenge #4 Personal Relationships In B2B
Personal relationship in B2B business is often an underrated aspect when it comes to making your business successful. With a small audience, only a handful of your clients will be responsible for a larger portion of your revenue. That makes personal relationships even more important. However, that is where the challenge lies in customer segmentation.
Personal relationships will interfere with the segmentation you want to do but B2B customers rely on personal relationships with clients for growth. It makes the customer segmentation part of it trickier which is why it is such a challenge to get customer segmentation right in such situations.
Challenge #5 Volatile B2B Market Conditions
What makes customer segmentation different for B2B businesses is the volatility of the B2B market. Demands may increase or decrease without any warning, even on a day-to-day basis. Now take this volatility and think it through a customer’s mindset. If demands shrink, they might no longer want to do business with your B2B business. This makes meeting customer expectations tough and proper customer segmentation even tougher.
You might even wonder “Why put customers into different segments for a B2B business when it is so difficult?”. That is where segmentation strategies can help overcome these challenges.
6 B2B Customer Segmentation Strategies To Overcome Challenges
Overcoming challenges in B2B customer segmentation is difficult. But what can help overcome challenges is using the right customer segmentation strategies for B2B business. Read here to learn about how B2B customer segmentation can bring profit.
Here are the customer segmentation strategies to use for your business:
- Firmographics Segmentation
- Tier-Based Segmentation
- Behavior-Based Segmentation
- Psychographic Segmentation
- Buyer Journey Segmentation
- Combination of Strategies
Strategy #1 Firmographics Segmentation
Firmographics considers the qualities of a firm or business you are working with. The type of business, what revenue it generates, how many employees there are etc. It also gives you an overview of the industry that you are working in. Now take that and add to it customer segmentation and you get firmographic segmentation.
Firmographic segmentation is often considered a fundamental strategy for B2B business and rightly so. Since you have to deal with multiple decision-makers, firmographics helps you understand where you can improve to ensure that those decisions are made easily for your clients.
With this strategy, you can also segment your customers into different categories and overcome overlapping segmentation challenges because your B2B business can target the specific pain points of your customers. Each business that is a client or potential client of yours can be divided into smaller segments which makes it easy to market your product to them.
Strategy #2 Tier-Based Segmentation
Not all businesses are the same and that is where tier-based segmentation comes into play. It is the segmentation a B2B business conducts to separate its customers. The value that one large business will have will be different from that of a smaller business so oftentimes tier-based segmentation is also called value-based segmentation.
When you segment your customers into different tiers, you have a clearer idea of how you can market your product to them. Larger businesses or long-term business partners will take priority over newer clients so it helps to know where you should focus your personal marketing strategies. It has its limitations but B2B businesses but tier-based segmentation helps with sales optimization as you get to know who is your valuable customers.
Strategy #3 Behavior-Based Segmentation
With B2B customers taking longer to finalize purchases due to complex products, behavior-based segmentation can help solve those challenges. The behavioral segmentation of your customers can help you understand how your customers are interacting with your business through purchase habits, purchase history, and how they interact with your product and brand.
Because you are segmenting your customers based on their behavior, you can see where you can improve to make it easier for your customers to understand your product. It will help especially for holiday marketing to see how customers interact with your business during these important times. Marketing efforts become much easier and help to reduce the time for key purchasing decisions to be made.
Strategy #4 Psychographic Segmentation
One thing that B2B business often overlooks is the customer’s actual business and catering to their business ideals. What your client’s brand image is and how they interact with their customers is important and that is where psychographic segmentation can help.
Psychographic segmentation looks at a client’s specific needs and wants and helps to create a strategy that is only for them. It makes your client feel special and builds a personal relationship with your B2B client. And since the B2B audience is smaller, it is a great strategy to cater to specific clients instead of many different clients together.
Strategy #5 Buyer Journey Segmentation
One challenge I mentioned that hinders B2B businesses are volatile market conditions. That is where buyer’s journey segmentation can help assess where the customer is engaging with your business in their buyer journey.
Every B2B client will be on a different stage in the buyer journey when they interact with your business. Due to market conditions, this might change and buyer’s journey segmentation will allow your business to assess them differently. Such a segmentation strategy can allow your business to react to the market condition that made a potential client come to you for their solution.
Strategy #6 Combination of Strategies
Now don’t get me wrong, there are limitations to all these strategies individually. But that does not mean that you cannot use all of these strategies together for your business. That is what makes these strategies good for your business because you can use a combination instead of just one.
For example, using behavioral, tier-based, and psychographic segmentation together can create the ultimate segmentation strategy for specific high-value clients. It is a form of hypersegmentation but it helps to tackle all the specific pain points for clients which is not possible with just one strategy.
Where one strategy might fail due to its limitations, the other strategies can help overcome them as well. It all takes the right data analysis to make sure to use the right strategies for your customer segmentation.
How A Bulk Order App Can Help Segmented B2B Customers On Shopify
Customer segmentation strategies are great, but how do you help your B2B customers once they are segmented?
Let’s take a wholesale store on Shopify that sells medical supplies in bulk as an example. They sell products with a lot of variants in color, type, and size. But because there were too many variants for the products, the B2B customers had to go through many product pages to add all the variants they wanted to cart.
With so many product pages to click through, the rate of cart abandonment rose for the store. In such a situation, the store first conducted firmographic segmentation to find out which customers were affected the most. They found that this was a problem for large private healthcare businesses.
When that segmentation was done, the store then conducted behavioral segmentation to see which product pages they interacted with were most affected. Through these two strategies, they found that the medical gloves product pages were most affected. Due to the many clicks required to buy the product, the product purchase was not being finalized by these large firms.
To solve the issue, the store owner integrated a variant bulk order app on their Shopify store to showcase all variants on one page. Let’s take a look at the page with the new app:
As you can see, with this app, the variants are all displayed on one product page. This helps streamline the bulk purchase process for this particular product with its custom variant display layout. Customers don’t have to go through multiple product pages to buy the variants. Once the customers add how much they want, they can easily add all of the variants with the add to cart button.
The app itself does not segment the customer but it helps once the customers are segmented. A variant bulk order app like this helps with targeting segmented customers with specific problems such as this. Once the customers are segmented, customizing the store page like this makes it easier for B2B customers to finalize their purchases.
Bottom Line
Customer segmentation allows your business to improve relationships with your customers. It helps make marketing decisions easier to make and more efficient. But customer segmentation is challenging to pull off. That is why overcoming challenges in B2B customer segmentation is made easier when you know the right strategies to use, even when you combine the strategies. With the right data analysis of your customers, implementing customer segmentation is made easy.
