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B2B Segmentation

Why segmentation is so important for B2B marketing?

b2b segmentation Mar 24, 2021

By Tom Newbould  – Co-Founder, The Marketing Leaders

While segmentation is frequently quoted within the context of B2C or direct to consumer marketing, it is just as important, if not more so, for B2B marketing.  Without segmentation, a B2B marketing strategy or campaign carries the risk of missing the point or more specifically, failing to reach the companies who could just be that golden customer or a 1m+ contract of the future.

As marketers know, customer segmentation allows marketers to draw an accurate depiction of their customers, put them in groups according to any similarities, and create pinpointed campaigns, messages, and creatives to specific segments of the customer base. Because B2B marketing tends to be targeted towards a smaller area of focus or radar area, and have a longer sales cycle, it means that segmentation can truly help build a more value-based relationship from the start, enabling efforts to be concentrated on particular target businesses.

B2B Segmentation 01

Furthermore, depending on the way in which you’ve arrived at your segmentation strategy, and specifically the way in which you’ve undertaken your research, it may also give you a huge steer on which channels will be most effective. This works for both acquisition (target/prospective customers) and retention and re-engagement of existing customers.

It is therefore very true to say that segmentation in B2B marketing can play a huge role in both effective marketing and profitability.

Preliminary considerations

Prior to determining your strategy, there are some important factors to consider. If you have an existing key account customer or particularly high-value contract you’re targeting, then the approach you take here may be completely bespoke to that company. In effect, they can be seen to be a segment of their own since the effort required may be disproportionate to any other company – and certainly worth it if you retain or acquire them!

The approach you take in general may also be affected by the pace at which you want to acquire more business customers or accounts, and the exact stage of growth and maturity your product or business is at. If your product is particularly niche, specialist, or applicable to a certain age of business (start-ups for example) then while that means there may be a very obvious route to take, it does not mean segmentation isn’t still valuable.

B2B Segmentation 02

Segmentation techniques

Broadly speaking, there are five B2B segmentation techniques that can be applied to your particular objectives:

1. Tiering

The extent to which a customer matches certain objectives of your business forms a method of segmentation known as Customer tiering.


This approach to segmentation ranks the importance of a customer based on how much that customer could bring in terms of value. One example of this is segmenting customers based on their predicted revenue potential. Another example is where the customer may be a business which of particular strategic importance. 

Account-based marketing, which has become a particularly popular method is a form of tiered segmentation. This strategy focuses on sales and marketing on a limited number of accounts predicted to yield the highest potential value. Account-based marketing ensures alignment of both the sales, business development and marketing toward a common goal of delivering a maximised potential return from a shortlist, as opposed to a more generic approach.

 

Tiered customer segmentation can also be highly effective with your existing customer base. The use of internal data combined with tiered segmentation enables marketers to divide existing customers based on their customer lifetime value and deploy highly targeted CRM activities and campaigns.

 

2. Firmographics

Firmographics is a method of segmentation which identifies shared qualities between customers, in a similar way to how B2C marketers might use demographic data for segmentation. Factors such as the annual revenue, number of employees, industry, location, or technology penetration can be used to identify different segments of targeted companies.

 

This technique can be particularly helpful when budget or resources are limited because the data required can often be easily sourced from public sources, such as a company website, annual return, or Company LinkedIn page. Firmographics are also relatively easily understood by non-marketing colleagues within a business, that may form a critical part of the overall process, such as business development, sales, or product functions.

B2B Segmentation 03

Firmographics works particularly well at the top of the marketing funnel, or in the early days of a sales and marketing lifecycle. While it is dangerous to make universal assumptions about individual customer needs and what will appeal to them, campaigns designed to raise brand awareness and create inbound leads within the pipeline via thought leadership (in the form of content, blogs, whitepapers, webinars, featured interviews, video content, or podcasts) usually have the highest impact when using firmographic customer segmentation.

 

Using firmographics as the only segmentation technique in isolation can bring a degree of ineffectiveness after the initial top of funnel success. Again, in the same way, segmentation just on demographics can have limited effectiveness in B2C marketing, firmographics have the same disadvantages in B2B marketing. There are limited conclusions that can be made and assumptions can become problematic. For example, just because a company appears to be growing based on the increasing number of employees it has, together with an annual turnover of £100 million, does not mean it needs your product or service. A number of additional layers of data are needed, or alternatively a combination of segmentation techniques within the sales and marketing cycle. 

 

3. Sophisticated Modelling

This segmentation technique identifies target companies based on their awareness of the problem your product solves. This enables a highly tailored approach to be taken with those companies, and more time to be expended in the research of and materials for them in all stages of the sales and marketing lifecycle.

A target customer identified through sophisticated segmentation may currently use a competitor solution where there are a number of alternative vendors in the market. In this case, the challenge is not necessarily to show how your product solves their problem, but rather highlight how yours is superior and differentiated from the competitors.

4. Behavioural Modelling

Behavioural segmentation can be very effective with existing customers both in terms of retention and identifying upsell opportunities.

It identifies the ways your current customers interact with your product or business in terms of rating the likelihood of upsell or losing the customer (churn) and responding accordingly. Sometimes it is easy to identify that the customer is underutilising the solution and respond with both target CRM and account management which can completely transform the revenue generated from that customer.

Behavioural segmentation can be particularly effective when used in combination with tiered segmentation because the two approaches help maximise the value of the existing customer base, which will show in terms of the retention and LTV metrics.

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5. Needs Modelling

Grouping your customers according to what they are looking for in a product is known as Needs-based customer segmentation. Which feature of the product will resonate most with them, or do they need a particular feature to outperform the competition in their particular market? Using this technique effectively can lead to a tangible uplift in your results.

Arguably of all the methods of segmentation, this approach offers the marketer the most accurate and effective way to target customer segments however it depends on matching what we believe are ‘the needs’ to ‘the right target customers’. It is also dependent on defining the needs correctly of course, but one would hope that has been factored in very well to the product itself and the way it was conceived.

Needs-based segmentation is highly scalable. It’s possible to designate as many needs-based groups as we believe are required from your initial analysis. It is also very aligned with automation and e-CRM because you can define the journey, messages, and materials around a needs-based model.


Conclusion

Segmentation in B2B marketing will undoubtedly help balance resources and time with the focus on the most relevant target customers, in turn leading to increasingly effective results.


As we have discovered, there is a range of different techniques and approaches that can be utilised however the right approach for you may require several of these techniques to be combined or utilised at different stages of the sales and marketing lifecycle.

Ultimately the goal of every marketer is to ensure their brand, product, and business is constantly connected to the customers that matter most and generate the highest value. This is what B2B marketing segmentation can deliver.