Effective marketing should account for distinct customer groups and the different requirements that these groups have. Companies have limited resources and therefore should not be expected to satisfy everyone. However, we should identify groups who want and need what we can offer, and target these people, while having the conviction to ignore those who do not. Determining where not to sell our product or service is just as important as where we need to.
The objective of segmentation research in b2b markets is to develop groups of companies which think in similar ways; this enables marketing and sales teams to focus on priority segments, which are deemed most valuable and most likely to purchase from you. One of the primary reasons for conducting b2b segmentation is to differentiate your company from the competition, a position which should be sustainable and defendable.
The potential advantages of business-to-business segmentation research are clear when considering the distribution of a typical company’s customers. The top 20% of customers could account for up to 80% of profit generated by the company. As much as half of this profit is spent attempting to serve the bottom 30% of customers: the most unprofitable group.
If the benefit is easy to grasp, delivering on segmentation is much more challenging. Some segmentation is based on demographics, more often called “firmographics” in the b2b world. In these instances, the segmentation is based on customer location, size (number of employees, revenue, or spend with the company), or industry (using either NAICS or SIC codes). While firmographic segmentation is relatively easy to implement, it doesn’t enable a differentiated position, which competitors cannot replicate or respond to.
Behavioral or needs-based segmentation is more difficult to implement but can yield greater results. Segmentation based on behaviors can measure differences in how customers purchase, what they produce and the methods of production. Segmentation based on needs focuses on customers’ requirements, wants, and decision drivers.
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B2B International can help you segment your customers and your market, leading to a successful marketing strategy and a differentiated competitive position. We can work with your company to:
Align product and service differentiation with your customers’ requirements
Achieve and maintain a competitive advantage
Develop product and pricing strategies which focus on the most valuable market segments