Marketing starts with…

… Segmentation – a B2B Perspective

Market segmentation is a process of grouping a diversified market into relatively more congruent segments based on certain criteria. It is not a new concept and certainly does not warrant more discussion at a concept level.

The purpose of market segmentation is to enable a company to differentiate its products and messaging and precisely reach targeted customers who have specific needs and wants. This benefits companies as they are able to make better informed strategic marketing decisions and use their tactical marketing resources more effectively. It allows the company to increase its overall efficiency by concentrating available resources on efforts that produce the best return on investment (ROI). This typically manifests in pipeline building as better quality marketing qualified leads (MQLs) and in pipeline management as improved flow and conversion of sales qualified leads (SQLs).

“Without Segmentation, you are training your audience to ignore you” (Brooke B. Sellas) 

There are marked differences between B2B and B2C segmentation and this justifies some elucidation. B2B markets are typically characterised by:

• Complex decision-making processes and stakeholders (E.g. The purchase of capital equipment will involve several business functions.)
• Seemingly rational procurement decisions (E.g. Purchasing what is needed versus what is wanted.)
• More complex products and offerings (E.g. Products that need to integrate into other systems.)
• Relatively ‘small’ target audiences (E.g. If your solution is targeting mining operations in Zambia – There are currently 13 mining projects in Zambia owned by 12 companies.)
• The significance of personal relationships (E.g. Personal sales~buyer relationships and trust, in the brand, product and sales representative, develop over time.)
• Longer purchase cycles (E.g. The purchase of a new ERP system can take several months, if not longer.)
• Fewer ‘needs’ segments due to common requirements across segments and sub-segments (E.g. The automated fuel management needs for a construction site and a mining operation are quite similar, although these are considered two different industry segments.)

In the B2C space the commonly accepted types of market segmentation are:

• Demographic (The Who – Age, Gender, Ethnicity, Income, Level of education, Religion)
• Psychographic (The Why – Personality traits, Hobbies, Life goals, Values, Beliefs, Lifestyles)
• Geographic (The Where – Country, Region, City, Postal code)
• Behavioral (The How – Spending habits, Browsing habits, Interactions with the brand, Loyalty to brand, Previous product ratings)
• Technographic (The When – The role that technology play, i.e. early adopters)

In the B2B space, this translates as:

• Demographic (The Who – The Primary & Secondary segmentation of a targeted company (the account) and a targeted Profession/role in the account (the persona)
• Psychographic (The Why – The business need that the solution solves)
• Geographic (The Where – Country, Region, City)
• Behavioral (The How – Budget levels and cycles, Procurement procedures, Browsing habits, Interactions with, and loyalty to, the brand, Current solution in use)
• Technographic (The When – The role that technology play, i.e. integration)

These parameters are ideally succinctly and accurately captured in the customer value proposition. (The topic of my next article.)

When should market segmentation be applied? The simple answer is ‘always’. You want to be engaging with the right personas in your target audience all the time. 

Where should market segmentation be applied? Again, the simple answer is ‘across all touchpoints’. You want to ensure that each engagement channel is purpose-designed, in as much as it can be, to maximise the target audience’s impact.

So how do you ‘do’ market segmentation? In my view, given our purpose of ‘find, segment and engage’, there are three key aspects, namely; a first-rate database, segment viability and market intelligence.

A first-rate database

This is super important. How useful is the database or CRM you work with now? I have seen some shockers. By ‘first-rate’ I mean accurate and current in terms of records and that all relevant information fields are catered for. (Account details, persona details, segmentation details, etc.)

Segment viability

Which segment(s) are most commercially attractive in terms of the need for your solution, size, growth outlook, ease of access, entry barriers, competitiveness, and other factors particular to your business? For obvious reasons, you want to focus your efforts on segments with high potential ROI.

Market intelligence

You need to find, segment and profile your targeted accounts and personas according to the segmentation categories. You want to engage with the right people, with the right message at the right time. This is about getting your hands into some market research. Simply put, you need to look. Avenues include networking, your sales team, your partners, existing customers, Google, social media platforms, websites, professional institutions, and data providers.

Closing Comments

Together with your customer value proposition marketing starts with segmentation. The effectiveness, and in many instances the efficiency, of all marketing strategy, tactics, activity, and communication aimed at new business, depends, and is concomitant to, rigorously, accurately, and relentlessly identifying, segmenting, and profiling viable markets.

Happy Segmenting!