Market segmentation is to B2B businesses what Bruce Lee is to Jeet Kune Do and martial arts movies. Neither would exist without the other.
For any business to be successful there are three simple principles: A product or service that solves a problem, identifying who would need your product or service, and setting yourself apart from your competitors.
Based on the above principles, it’s clear that for your business to be a success, market segmentation is your weapon of choice.
Market segmentation is the process of grouping or dividing your prospects and customers into buckets or cohorts.
This segmentation is done based on the following criteria:
Needs: a pain point for which your product or service provides a solution
Buying characteristics: based on decisions and responses of customers when buying a product or service. Key questions to ask here are: why did customers make the purchase decision? What influenced the customers to buy your product or service?
Apart from this, market segmentation is typically done to improve conversion rates, optimize ad spends, and deliver a more personalized user experience. Let’s take a deeper look into how you can segment customers.
The first step to market segmentation is to analyze and understand retrospective and prospective data you have on your customers. Your market segmentation is solely based on the overall quality of your customer data.
Regularly organized, updated, enriched data (lack of obsolete data) will allow you to segment your target markets with precision.
To get a comprehensive idea of what market segments you should target, you need to leverage your company’s single customer view. A single customer view is basically a self-sufficient, cohesive, and up-to-date database that incorporates every single piece of data that is generated based on individual customer’s interactions with the company.
If your company does not have this, then invest time to set it up. This can be done by collecting and storing all siloed customer data from your customer relationship management (CRM) system, marketing automation platforms, and more.
Now that you have a single view of your customer data, it's time to prep this data. Start by looking into the details. As they say, “the devil is in the details”.
This will allow you to see patterns and commonalities in your customer data. Next step is to
use your company’s ideal customer profile to identify which of your customers are ideal.
For example: Digging through your single customer view, you identify 500 ideal customers of which 100 are top performing customers. These customers bring in the most revenue. Your goal is to find similar customers in the segments you want to target.
If your company does not have an ideal customer profile set up, then now is the time to create one. Check out our blog and template on how to create and set up ideal customer profiles for your company.
In a scenario where your company is in its nascent stages, the best way to approach this step is to look at who your competitors are targeting and chase after them to generate revenue.
Consequently, the next step is to figure out what type of market segmentation approach you should take.
While the most popular form of market segmentation is firmographics, it is not the only way to segment B2B customers. Let’s take a look at the different variables with which you can segment your B2B customers.
Firmographic Data: Just like how you spend time assessing what groceries to buy, you need to spend time assessing a company and its traits before you try to sell to them. This is where firmographic data comes into play. Firmographic data entails any data of a company and its willingness to buy. A few firmographic factors to consider when segmenting B2B customers are: company size, geographical location, number of employees, revenue generated, funding mergers, acquisitions, and more.
Firmographic data allows you to look at your customers at a macro level and not at a granular level. For example: just because you're a SaaS company doesn’t mean that you need marketing automation software, or if your company is generating millions of dollars in revenue does not mean that you need a complete finance solution.
Essentially, you need more data sets to establish your market segments and not just rely on firmographics.
Technographic Data: Technographic data is a very strong indicator of a customer’s buying intent. Technographic data is defined as data-driven insights that help businesses identify which accounts are most likely to convert based on the knowledge of their current technology stack.
Analyzing the technology stack of your top performing customers will allow you to find new companies that use a similar technology stack for you to target. In addition to that, you can use Slintel’s technographic tool when setting up your target market segments.
Demographic Data: Demographic data are the key statistical values of the general populace such as age, income, profession, brand preferences, clickthrough rate, etc. This data can be used to identify the characteristics of decision makers that you are targeting. Here, you can use buyer personas that your company has established to narrow down what demographic values you need to focus on.
Psychographic Data: This data provides the emotional insight behind purchase decisions. Psychographic data can be used to understand psychological implications of a customer’s buying decision, their values, interests, attitudes, and other behaviors. Old school techniques like surveys to generate this information takes time. You can use data providers that collect this information in a much more systematic way.
Thematic Intent: This method relies on keywords. Finding websites that use similar keywords can help you identify prospects. These prospects fall under the market segment that align with your product’s use case.
For example: If your company sells a tool that supplements a prospect’s existing marketing automation platform (MAP), then identifying websites that use keywords to indicate that they are using the MAP is the first step.
Once you have identified the keywords, you can use Google to segment these high intent prospects.
Expiring Contracts: Targeting companies that use a similar product as yours based on their expiring contracts is another way to segment B2B customers. You can swoop in when your competitor’s contract expires and turn them into your customers instead. You can obtain this kind of data by using a tool like Slintel.
Using a single or combination of these segmentation styles, you can develop market segments that work for your company. Do not forget that there is no one-size-fits-all solution when it comes to market segmentation.
In this step, you need to develop and implement hyper-personalized and targeted marketing campaigns. There is no point in setting up your target market segments if you are just going to use a similar approach to nurture them.
Using account-based marketing (ABM) will allow you to develop personalized campaign(s) and outreach for each segment to cater to their varied needs. This way, you can use individualized campaigns to ensure that high value prospects are reeled in and convert into your customers.
Now that you have identified what market segments to target, it is time to put it into action. Once you start to use your market segments, you need to track and record how these segments perform over time.
Keep an eye on your segments to identify which market segments are performing well. A market segment that performs well will consist of customers who bring the most business for your company, provide opportunities for upsell or cross-sell, provide multiple referrals, and become advocates for your company/brand.
Once you identify which segments are not working for you, you need to stop targeting them. Redirect your efforts to segments that are working for you and prioritize your sales and marketing efforts on them. By doing so you have more resources at your disposal to address their needs, concerns, and objections.
Market Segmentation is the starting point to satisfy the needs of your customers profitably. Answering the 5 W’s (who, what, when, where, and why) is often the best way to start segmenting B2B customers. Use the above steps when developing your target market segments and reel in the big fishes to generate revenue for your company.