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Business-to-business (B2B) market segmentation is not unlike traditional business-to-consumer (B2C) market segmentation in that the goal of each is to organize buyers with similar traits into groups so that a company can create products and marketing messages that resonate with the greatest number of people in the most profitable way(s). But while the goal for both might be the same, the most popular variables used to divide each are vastly different. In B2C markets, consumers are most often segmented according to shared geographic, demographic, psychographic or behavioral characteristics. In B2B markets, however, buyers are fewer in number, much more complex and with a lot more rigid criteria dictating their purchasing decisions. As a result, they are frequently segmented according to other types of measures. Here are some of the most common B2B market segments:
Firmographics are the demographics of the B2B world, the easily identifiable way of breaking business-to-business consumers into groups of those with similar features. The features could be almost anything, such as number of employees, annual revenue, location or industry, with the advantage being the relative ease with which such data can be acquired. Indeed, firmographic B2B market segmentation is usually cost-effective and, thus, often the first way companies attempt to segment their B2B customers.
With needs-based segments, companies attempt to divide their customers according to their most prominent needs. Maybe B2B customers focus on cost when buying a product. Maybe they want convenience. It can be any number of things. Thus, needs-based segmentation is a more subjective process than firmographic segmentation and a lot more time-consuming. However, by identifying the factors that drive customers on their purchasing journey the most, companies are able to focus their resources on solutions that match the needs of the greatest number of their customers and, as a result, is a highly valuable type of segmentation. After all, it’s a waste of time, money and energy if you’re marketing a product or service to people who don’t need or want it.
B2B market segmentation can also occur according to the value that certain groups of customers bring to the table: those customers buying the largest volume of the highest-priced product, for example. With this type of segmentation, businesses can prioritize their business strategies based on the group of customers that is the most profitable. It’s an especially useful strategy for businesses wanting to maximize their pricing strategies, since it allows them the opportunity to alter their prices for different segments and, therefore, maximize their profits.
Behavior-based B2B market segmentation, on the other hand, is used when companies want to maximize customer loyalty and retention. With it, businesses arrange existing customers into groups based on their shared behaviors so that they can identify how, when and where certain groups of customers interact with their brand. With that knowledge in hand they are then able to develop plans for future interactions that help them retain customers and strengthen loyalty to their brand.
No two customers are ever the same. As a result, a company — whether in a B2C or B2B setting — can’t expect the same strategy to appeal to all consumers. B2B market segmentation is a valuable tool for businesses who want to maximize their B2B business decisions. To learn more about the best type of segmentation to use in your specific industry and for your own unique business objectives, please contact our team at Research America.