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.
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.
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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.