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 don’t address it very well at all which leads to missed opportunity and inefficiency. Everything in sales and marketing revolves around increasing the probability of closing more deals in less time. An accurately carved out segmentation plan will have a dramatic positive impact. The more relevant you are to your prospects – the better your odds of winning!
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 about clearly defining your target audiences and then communicating in ways that will persuade them to buy 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 clear and one we can all relate to. We become bitterly turned off marketing when what’s being pushed is not and will never be, relevant to us. Market segmentation is so crucial because it helps make sure the people you reach out to 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.
When doing the research to build your segmentation strategy, several key ingredients should be incorporated into your framework. They are:
- 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 if you broadly expand that you can provide the levels of sales coverage, delivery and support needed.
- Account Characteristics
What type of organization aligns best with your offering – SMB, Enterprise, Government, not-for-Profit? What industries are they in and what clients do they serve? What do these companies look like in terms of annual revenues, employee counts, etc?
- Market Adjacencies
Are there sub-segments within your target markets and how do you define them? Are there other closely related industries in their respective ecosystems that are worth pursuing?
- Addressable Market
This is an estimate of your overall market size by segment. You can leverage external research, or conduct your own to understand how many companies could potentially be a “fit” for your products or services?
- Buyer Profiles
Who are the specific buyers and influencers in the companies you are trying to sell to? What are their roles and titles? Why would they buy what you sell? Where do they connect with peers? More sophisticated marketers will build “personas” as a way of describing their target audiences. This is helpful later when you craft content and other communications.
- 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?
If your networks and lists are early-stage, a more immediate way to distribute content is through publishing platforms such as LinkedIn and Medium. These are easy to use, free and can attract a good number of prospects to your brand. There is also a long list of other powerful, but less direct ways to get your message out. Examples include:
This is not everything you might want to consider in your market segmentation – but the main components are here. This knowledge builds 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 competitive landscape.
Taking a shotgun approach to the market just won’t work in the long-run. Investing in market segmentation upfront is guaranteed to improve results, save time, and reduce costs!