B2B Market Segmentation: Better Understand, Engage And Convert Customers 

The days of a one-size-fits-all marketing strategy, particularly in the B2B sector are long gone.  

In today’s more competitive marketplace, where customers demand that all their requirements are met, marketers need to be much more flexible and view each customer as a fresh project with unique needs that they must find a solution for.

Subsequently, B2B market segmentation is essential for any marketer looking to deliver more tailored strategies and achieve better results for their customers.

In this blog, we’ll show how market segmentation can help you to better understand, engage and convert your customers.

So, let’s begin.

Understanding B2B market segmentation

B2B market segmentation is based on a strategic approach where a business market is divided into distinct groups based on specific characteristics and behaviours, thereby enhancing target marketing efforts and business efficiencies.

How customer segmentation helps build a customer-centric business model

In the B2B context, customer segmentation helps you to identify the unique needs and attributes of different groups within your market.

By recognising and focusing on these groups, you’re better able to tailor your product development, marketing strategies and customer service to meet their specific requirements. From here you’re able to establish a customer-centric business model, which helps prioritise your target audience’s needs and increase customer satisfaction and loyalty.

Customer segmentation vs market segmentation

At this point, it’s important to know the differences between customer segmentation and market segmentation.

Customer segmentation

Focusing on existing clients, this approach categorises customers based on their purchase history, interaction with your services and their potential for future engagement.

Market segmentation

Broadly targeting potential customer groups in the wider market, market segmentation looks at factors that could influence their decision to engage with your business.  

While both of these concepts are intertwined, customer segmentation drills down into the nuances of your current client base to leverage growth and customer retention.

How B2B and B2C market segmentation differ

To appreciate the value of B2B market segmentation, it’s important to highlight how it differs from B2C market segmentation.  

In fact, the segmentation of B2B markets diverge quite considerably from B2C. This is primarily because of the complexity of transactions, as well as the length of the buyer’s journey in B2B market scenarios.

Decision-making

Compared to B2C which usually involves an individual or family, B2B purchasing decisions typically involve multiple stakeholders.

Sales cycle

The B2B sales cycle also tends to be lengthier, as there’s a much greater need for lead nurture and building relationships.

Customisation

B2B products or services also typically require customisation and developing more personal relationships between buyers and sellers.

Knowing the differences between the two is crucial if your segmentation and targeting in a B2B environment are to be successful.

Benefits of B2B market segmentation

Through B2B market segmentation, you’ll discover potential tools that will help you sharpen your business strategy. Then by dividing your market into smaller, more focused segments, you’ll be able to tailor your approach for maximum impact and efficiency.

Revenue boost

When you’re able to target segments most likely to convert, it increases your potential for revenue.  

Concentrating your efforts in this way, gives sales teams leads with the highest likelihood of closing, rather than having to cast their net much wider.

Cuts costs of sales and marketing campaigns

Segmenting your B2B market also generates efficiencies in your marketing budget.

When you know which segments are most valuable to you, you can shift your marketing efforts there, to reduce waste in less productive areas.

Enhances product development

When you develop a deeper understanding of different customer needs, thanks to customer segmentation, it helps you to drive greater innovation and improvement in your product development.

If you can tailor your products to meet the specific requirements of each segment, it can make them more competitive and desirable.

Improves product development

When you understand the unique challenges and needs of each of your customer segments, it allows you to create more personalised experiences for your customers.

This tailored approach can both significantly enhance customer satisfaction and engagement with your brand.

Hones your marketing messaging

B2B market segmentation gives you the ability to craft messages that resonate deeply with each segment by better understanding their specific needs and pain points.

In this way, clearer and more targeted communication has an improved chance of making an impact, thereby improving the effectiveness of your marketing campaigns.

Improves customer retention and loyalty

When existing customers feel understood and valued, they’ll be more likely to stay loyal to your brand.

Segmentation ensures your efforts in customer service and relationship management are finely tuned to the needs of each distinct group, which in turn helps reinforce their commitment to your company.

How do you design market segments?

If you’re to segment your B2B market effectively, you’ll need to structure your approach.  

By following these steps, you can ensure the segments you develop are actionable and aligned with your business strategy.

Get your stakeholders onboard

Firstly, you need to involve key stakeholders from all your departments, as their insights will help inform the segmentation process and ensure alignment with your overall business goals.

Identify your goals and business objectives

You must clearly define what you aim to achieve with B2B segmentation.  

Your objectives could range from anything such as enhancing your customer experience to achieving more efficient targeting in marketing campaigns.  

Determine your segmentation criteria

Look to select relevant criteria that accurately reflects your customer needs and behaviours.

This can include anything from industry and company size to geographic location or buying patterns.  

Employ existing data

To help inform your segmentation, examine your CRM and sales data, as this can enable you to uncover useful patterns and trends. Such data can be crucial to understanding the current state of your market.

Gather and analyse customer data

To segment your market effectively, you’ll need to collect detailed information on your potential customers.  

Interviews, surveys, industry reports and analytics software can be valuable ways of gathering this type of data, which you can then analyse to identify common needs among these customer groups.

Create market segments

Once you’ve gathered and analysed your data, you can develop distinct market segments.  

Each segment should represent a group of potential customers that have similar traits and behaviours.

Target segments

Lastly, you’ll want to tailor your marketing strategies to the needs of each segment.

By personalising your content and targeting your advertising, you can increase your engagement and conversion rates.

Methods for B2B customer segmentation

When it comes to B2B market segmentation, it’s crucial to be able to identify different groups within your business.  

Here are some methods you can use to tailor your marketing strategies and better meet the needs of each segment.

Firmographic segmentation

Firmographic segmentation is concerned with categorising businesses into groups based on shared company attributes.

These may include:

• Industry: manufacturing, healthcare and technology
• Business size: by number of employees or annual revenue
• Company location: based on where the company is headquartered or operates
• Growth stage: startups, scale-ups, established enterprises.

Behavioural segmentation

Through examining customer interactions, behavioural segmentation looks to examine patterns such as:

• Usage rates: frequent users versus sporadic users
• Purchasing behaviour: loyalty to your brand and repurchase rates
• User status: potential, first-time and regular customers

Segments based on tiers

With tier-based segmentation, you’re able to rank customers based on the value they bring to your business, such as:

• Top-tier customers: those with high revenue and strategic importance
• Mid-tier customers: those with moderate importance and potential for growth
• Lower-tier customers: those smaller accounts that require less personalized attention

Segments based on needs

You could look to align your offerings with your customers’ requirements through needs-based segmentation.

• Custom solutions: focused on services tailored for unique business problems
• Standard offerings: focused on general products suitable for a broad audience
• Service support: focused on differentiating customers who need extensive support versus those who do not

Segments based on value

With value-based segmentation customers are assessed according to their revenue potential and cost to serve.

Considerations under this approach include:

• High value: these customers offer significant revenue or strategic value  
• Medium value: these customers provide average revenue with appropriate resource allocation  
• Lower value: these customers require minimal resources but yield lower returns

Customer segmentation by customer sophistication level

You could choose to segment your customers by their level of sophistication and expertise.

These could be categorised similar to the following:

• Experts: those customers with advanced knowledge of your products or industry
• Intermediate: those with a moderate understanding but need some guidance
• Novices: customers who require detailed support and education on your offerings

Challenges of segmenting B2B markets

Segmenting B2B markets, can bring with it a series of intricate challenges that are unique to the nature of how businesses make purchasing decisions. So, it’s prudent to be aware of these before you move ahead with any segmentation projects.

More complex decision-making

Firstly, you’ll find that decision-making processes are typically more intricate in B2B markets than B2C ones. This is because businesses often have multiple stakeholders involved in the purchasing process, that each have their own concerns and criteria.

Key factors that can influence B2B decisions include long-term relationships, strategic value and return on investment. Therefore, understanding and grouping these decision-makers requires a deep insight into organisational structures and the purchase flow within businesses.  

More rational buyers

When it comes to purchasing, B2B buyers tend to base their decisions on logic and rational evaluation rather than emotion. This rational approach means your segmentation must account for the buyers’ focus on efficiency, scalability and how well a product or service matches an organisation’s needs.  

Given that these factors can vary significantly from one business to another, segmenting markets based on these rational requirements demands an in-depth understanding of diverse industry needs and operational nuances.

B2B product complexity

Products and services that are typically traded in B2B markets, are typically complex and require a lot of customisation. And unlike standardised consumer goods, B2B offerings are typically tailored to address specific business problems.

If you’re a marketer, you must consider that your market segments may require distinct variations of your product, which should cater to different technical specifications, service agreements or regulatory compliances. This means, you’ll likely need a more sophisticated approach to accurately identify and define market segments.

How SmartSurvey can help you

When it comes to strategic marketing, B2B market segmentation is a vital component that goes beyond mere categorisation. In fact, it looks to gain a deep understanding of the diverse needs and characteristics of your target market. In doing so, effective segmentation can enable your organisations to tailor its marketing efforts to specific customers groups, helping to enhance engagement and conversion rates.  

Subsequently, the collection and analysis of detailed customer feedback is essential to this process. However, if you’re using SmartSurvey and you’re on the right survey plan, you’ll have all the targeted and fully customisable survey templates, performance, functionality and features including dashboard tools to quickly gather the insights you need.

If you’re looking to breathe more life into your B2B marketing strategies and make them more meaningful and impactful for your customers, there’s never been a better time to get your market segmentation techniques and data collection tools in order.