Category Archives for "Market Segmentation"

Market Segmentation: A Critical Ingredient of B2B Marketing

Market Segmentation
Market Segmentation

When it comes to factors that accelerate growth in a B2B business, one of the most powerful is having well-defined market segmentation.

Big consumer brands have known this for decades and have the process down to a science. They know their target audiences inside and out, and how to position their products for optimal success in any given market. By combining precise geographic, demographic, behavioral, and psychographic data, they understand who will buy their products, where, how, and why. With some focus and energy, you can too!

Many B2B companies don’t pay enough attention to this critical aspect of marketing. Some rely on intuition or "gut feel," which leads to missed opportunities and inefficiency.

Everything in sales and marketing revolves around increasing the probability of closing more deals in less time. Accurate segmentation has a dramatic impact because the more relevant you are to prospects – the better your chances of engaging with them.

What is Market Segmentation?

Investopia defines market segmentation as “the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of prospects who perceive the value of your products and services differently from one another.

Generally, three criteria can be used to identify different market segments: 1) Homogeneity – common needs within a segment; 2) Distinction – unique from other groups; and 3) Reaction – similar responses to your marketing.”

It’s all about clearly defining your target audiences and then communicating in ways that will persuade them to consider your products or services.

Why is Market Segmentation Critical?

You may have heard the adage that people like to buy, but they hate being sold to. This is slightly paraphrased, but the idea is one we can all relate to. We become bitterly annoyed with marketing when what’s being pushed is not relevant.

Market segmentation is crucial because it helps make sure the people you contact can actually benefit from what you’re selling. Put another way – market segmentation ensures you are talking to the right people about the right things.

The Basic Building Blocks

When doing the research to build your segmentation strategy, the following essential ingredients should be included in your framework. Answering as many of these questions as possible will get you off to a great start.

  • The “Sandbox”
    What markets do you want to serve geographically? This can be local only, specific cities, provinces/states, regions, or countries. You need to make sure that if you plan to expand rapidly, you can provide the levels of sales coverage, delivery, and support required.
  • Addressable Market
    Often one of the toughest questions to answer is, "what is your overall market size by segment?" Fortunately, online government data and other industry research (free or paid) are often available online. Ultimately, you want to know if there is enough potential business accessible to support your sales goals.
  • Account Characteristics
    What industries are they in, and what clients do they serve? What type of organization aligns best with your offering – SMB, Enterprise, Government, Not-For-Profit?  What do these companies look like in terms of annual revenues, employee counts, etc.? How do they operate? 
  • Market Adjacencies
    Are there sub-segments within your target markets? How do you define them? Are there closely related industries in their ecosystems worth pursuing? Are there partners you work with that have access to customers you want to pursue?
  • Buyer Profiles
    Who are the buyers and influencers in the companies you are trying to sell to? What are their roles and titles? What problems could you solve for them? Where do they connect with peers? Where do they get sources of information related to your offerings? More sophisticated marketers will build “personas” as a way of describing the people in target audiences. Always remember - you may be trying to break into new accounts, but you are still selling to human beings!
  • Buying Behaviours
    What processes do they typically use to buy – formal procurement, informal? When do they buy – is it seasonal, based on specific events, or random? This will not be the same for every company you approach, but often there are discernable patterns in specific industries. Government procurement is an excellent example because it's typically rigid and based on a Request-for-Proposal (RFP) purchasing process.

Precise marketing segmentation helps build the foundation needed to develop your market positioning, messaging, and most everything else that follows. It’s also important to think about market segmentation in the context of your product capabilities and the competitive landscape.

Conclusion

Virtually everything in B2B marketing revolves around precisely defining your target audience and their sub-segments. Taking a shotgun approach to the market simply won’t work in the long-run. Investing in market segmentation upfront is guaranteed to improve results, save time, and reduce costs! Like most things, how you define your target market will evolve over time. It's a good idea to review and refresh your segmentation definitions during your strategic marketing planning cycles.

Please share any ideas or thoughts you may have on this topic and contact us if we can assist in any way. To get notified when new articles are published, please hit the button!

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Randy Fougere, President, Think2Grow Marketing
With a passion for building brand awareness and lead generation, I started Think2Grow for B2B clients looking to accelerate growth through better marketing strategy and execution - something I have been doing for more than 30 years now.

Selling Services: “In-House” is the Toughest Competitor

Selling Services
Selling Services

​In a recent article called Competitive Analysis – Know More, Win More!, I stressed the importance of getting to know your competitors.

​It struck me afterward that for those selling services, particularly in the B2B space, the toughest battle is usually fought against in-house resources. It’s often easy for us to lose sight of this vital fact, and I think there is a missed opportunity when we don’t pay it the attention it deserves.

​In-House or Outsource?

​There are plenty of arguments for and against outsourcing. Should manufacturing companies run their own cafeteria? Should legal firms run printing departments? If those activities are not core to their respective missions and strengths, then the reasonable answer is “no.”

There are certainly situations when running non-core functions in-house can make sense, but hidden costs and lost opportunity should always be major considerations. So why do companies hold onto activities that don’t serve a strategic purpose? Some common reasons are as follows:

  • They believe doing as much as possible in-house gives them more control
  • They think they are saving money (in some cases this may be true)
  • They have some capacity available and they want to keep people busy
  • Challenges in finding, trusting and then managing outsourcing partners
  • A previous bad experience with outsourcing – regrettably this can happen
  • For some business leaders, it’s a mix of ego and human nature – “why pay someone else to do it when we have people here?”

​Selling Services More Effectively Against In-House

​The intent of this article is not really to answer the outsource / in-house question. The goal is to get you thinking about the part of your market choosing to do what you provide, themselves.

You should view this group as a unique market segment and in a real sense, a formidable competitor. When selling services to these companies, you should be as strategic as you would when facing an external rival. Here are some ideas that may help:

  • ​Know your industry well enough to get a sense of the size of the “Doing-it-Themselves” portion of it
  • If a high ratio of companies in your addressable market are performing your services themselves, you need to know why and how
  • The insights from the point above will help your positioning and messaging have greater impact
  • If this is your situation, the messaging gets more heavily weighted on “why they should be outsourcing” first – followed by “why they should outsource with you”
  • Focus on clearly articulating the value of outsourcing – help prospects understand how they win!
    • Build a business case and use cost-analysis tools showing ROI and the advantages of leaving it to the experts. There is always interest in saving money and doing what makes sense for the company. It’s important to show the many hidden costs as well.
    • Point out how your prospect can focus on other aspects of their business that are more strategic. For example, if you are an IT hosting company, your message may be something like “Ms. Prospect, you are accountants. Rather than investing time and money managing servers, networks and storage – let us do that! You can reduce headcount and get IT working on internal and client-facing applications that will improve your business and help you differentiate.”
    • Show proven results and metrics from similar companies using your services. Leverage testimonials and case studies. – a sure way to gain the attention of your “in-house” prospects.
    • Build the “value of outsourcing” story into your presentations, sales talk-tracks and other collateral, and lead with it
  • Think about the migration path and be able to show them how they will transition. Again, use real-world scenarios and map out the processes you have in place to make it easy and smooth.

​Some of this may seem obvious but make no mistake – selling services requires a different kind of positioning. And, if you have a large portion of potential prospects written off because they don’t outsource now, you are missing a significant opportunity! Change your approach by heavily educating these prospects on why outsourcing makes sense. If not, your pitch will almost certainly fall on deaf ears.

Please share any thoughts or experiences you may have with this topic. Contact us if we can help you with your marketing in any way, or point you in the right direction.

The Optimal Marketing Mix? Let Your Target Audience Decide!

Optimal Marketing Mix
Optimal Marketing Mix

Choosing wisely and in the right proportions is difficult. But, it plays a significant role in determining how well your marketing investments will pay off.

In every marketing planning process, it comes down to two simple questions. What should we do and how much should we do it? With limited resources and budget, marketers need a solid rationale for their choices. The strategy will be less effective if it’s based solely on the latest trends, last year’s plan, or guesswork. Like virtually all things in marketing – focusing on the target market will help you develop the best possible scenario.

In this article, we’re going to look at the optimal marketing mix in more detail and why basing it on target markets is so important. While there is seldom a perfect blend, the goal is to get as close as you can.

What is the Optimal Marketing Mix?

Although they are central to the overall strategy, we’re not talking about the traditional “marketing mix” – product, place, price, promotion, etc. Here we refer to the specific campaigns and initiatives you will execute over a given period. It’s the precise definition of the amounts of time, energy and budget you will spend on each primary activity.

The good news is that there is a fairly limited choice when it comes to marketing. If you think about categories of activities such as brand building, lead generation, channel development, or sales enablement – the list is not that long. The challenge is picking the work that will have the greatest impact. If you choose well, your results will be stronger with less effort and cost. If not, the opposite will come to pass. There are other key factors – such as competition, or the complexity and price of your offering. While these are important, they too revolve around a target market.

Why Target Markets Matter

Planning your initiatives in the context of who you are selling to, will always be more productive and fruitful. It seems intuitive enough, but can be easily overlooked when caught up in a busy workload and trying to stay afloat. If you have done a reasonable job with marketing segmentation, you have a good understanding of the characteristics of each target audience. Here are some typical attributes used in defining a target market.

  • Are your prospects B2B or B2C, government, or not-for-profit?
  • Are they small to mid-sized business or larger enterprises?
  • Where are they located?
  • How many companies or consumers make up the target market?
  • Is there a typical type of person who buys your product or service?
  • Where do they meet or communicate with peers?
  • How do they get information to learn about products and services such as yours?
  • How do they buy? What is the buying criteria? How often do they buy?
  • Are there trends in the purchasing processes they use?

How These Factors Impact Decision-Making

When focused on the breakdown of a target market, it should naturally lead to thinking about the approach in specific ways. Here are a few examples and the impact they have on selecting an optimal marketing mix. The list can on and on, but you’ll you get the idea.

  • If you sell B2C to a broad audience, digital and traditional advertising will be a healthy part of your mix. If you sell a complex technology to a well-defined market of a few thousand companies, more direct campaigns will likely be best.
  • If your typical buyers are young and heavy social media users, you will invest more in this area. An activity such as telesales will likely not be high on the agenda.
  • If you’re in a mature, price-driven market – sales and promotional tactics may play a vital role in your plan.
  • If you have a high concentration of prospects in certain cities, in-person activities such as seminars could be wise choice.

Conclusion

Choosing activity based on what you know about your prospects will significantly increase the odds of creating the amount of awareness, attraction, and action needed to achieve your goals. This approach will be more efficient since you won’t waste time and energy aiming your marketing in the wrong places, or at the wrong people. If you don’t understand who they are and what makes them tick, how can you possibly figure out how to engage them? As a side benefit, It will also help you refine your messaging so it resonates most with the people you want for customers.

When you build your next marketing plan, try to look at all your decisions through the lens of your target audience. When a target market guides the thinking in selecting your optimal marketing mix, it’s bound to improve the results.

Please share any ideas or thoughts you may have on this topic and contact us if we can assist in any way. To get notified when new articles are published, please hit the button!

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Randy Fougere, President, Think2Grow Marketing
With a passion for building brand awareness and lead generation, I started Think2Grow for B2B clients looking to accelerate growth through better marketing strategy and execution - something I have been doing for more than 30 years now.