No two businesses are alike, just like snowflakes or fingerprints. Each business has its unique personality traits, which help define its core values and who they are. It’s important for a B2B company to be able to recognize these traits within its customer base. This is the first step to establishing a segmentation of the market.
What is market segmentation?
The definition of market segmentation and targeting is the categorization of our audience according to their unique 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 is different, as it involves the categorization and breakdown of businesses, which are usually made up of many decision makers and moving parts. The following are some of the most important target segments for business:
- Segmentation based on firmographics: It is similar to how you might think about demographics of individuals, but it takes into consideration certain aspects of the business, such as its location, industry, and whether or not it is new.
- Segmentation based on size: The size of a company can be measured by its total revenue or the number of employees.
- Segmentation by Customer: It is the breakdown of customers. What are the customers of your customers?
- Segmentation based on behavior. Behavior refers to the buying habits of your customers: how frequently they purchase, whether they shop online or in person, their level of brand loyalty, etc.
Market segmentation is important
In the end, customer segmentation is about satisfying your clients’ demands in a profitable way. By dividing your audience into groups that have distinct needs, you are able to better allocate your marketing budget for a greater return on investment. Instead of wasting marketing dollars on an audience too large to generate real results,
B2B segmentation forces marketers to: 1. look closely at their audience and 2. appeal to each segment’s needs individually. It is important to make sure that you are spending your marketing dollars wisely by getting the right messages in front of the right people.
B2B segmentation can also help you identify businesses you do not want to target and set aside those that aren’t the right fit for your products or services.
The benefits of segmenting marketing are numerous and include five in particular:
- A better campaign performance: You may reach a smaller audience, but you will have a higher conversion rate if you target a specific group.
- More informed product development: You may find that by analyzing the needs, wants, and characteristics of your customers, you can identify new areas in your business to develop or redevelop to better serve them.
- Discovering the areas of expansion: Are there niche groups you haven’t yet reached?
- A better business focus: You can improve your business focus if you have been trying to appease everyone up to now.
- Marketing is not the only way to make informed decisions: Segmentation will help you understand how customers react to pricing and distribution. This will allow you to make the necessary adjustments to your business.
A market segmentation strategy example
Here is an example of a simple customer segmentation strategy. It’s a simple example, but it shows how effective market segmentation is.
Let’s first say that you own a car steering wheel manufacturing company. You’ve been marketing your product globally to car companies and have a good reach. You have a new steering wheel that is designed for high-end SUVs, and you are about to launch it.
Your marketing budget will be $1,000, which should reach at least 10 car companies. You realize that it is not necessary to market the product to companies that do not make SUVs or to companies that sell economy cars. So you divide your audience into two categories:
- High-end and economy car companies
- Companies that produce SUVs and those that do not
You can save money by eliminating companies that don’t need your product. This $1,000 is spent on putting your product before 10 companies that are interested in your product, increasing your chances of making a sale.
