Business to Business Market Segmentation Strategies
Business to Business (B2B) Segmentation Variables:
Various approaches you could consider in B2B segmentation:
1. Geography (For example: global, national, regional, local)
Some companies sell worldwide while others sell locally. This is generally a starting point for creating your B2B segmentation. Once you decide where your target market is, you can go into more details.
In addition to geography, you should also consider more factors like language and culture. For example, you can decide to focus on targeting globally only to the English speaking countries.
2. Company profile (For example: number of employees, revenue, years in business, industry, credit rating, ownership, technology used)
By using these company profile variables you can create and evaluate many different segments. At each step in your segmentation, evaluate how important and relevant each variable is to your business.
For example, company’s revenue can be relevant segmentation factor if you sell production equipment worth millions of dollars. However, company’s revenue might not be so important in your segmentation if you sell $300 inventory management software.
3. Purchasing process (For example: price based purchase, approved vendor process, bid process)
Based on your business strategy and the way you do business, you want to consider organizations with certain purchasing process in place. This is very useful segmentation to avoid waste in your marketing.
4. Risk (For example: risk takers vs risk averse)
The risk variable is important for some products especially when selling brand new products, technology driven products, new industrial equipment, outsourcing solutions and high level consulting services.
5. Product adoption stage (For example: innovators, early adopters, laggards)
When you sell brand new products you want to target the innovators. These are the companies continuously looking for ways to adopt new products, processes and services and find new ways to improve their business performance. On the other hand, other companies might focus on selling the good old product and service to the laggards.
6. Organizational structure (For example: centralized structure with typical corporate decision making vs decentralized structure where local regions and offices make purchasing decisions)
For selling big ticket items in most cases you need to deal with corporate buyers while in other cases you may want to target local buyers through company branches and local offices.
For new businesses, products and services it always takes a certain degree of experimenting with various segments and combination of segmentation criteria.
This is why you will experiment on a small scale. While there is no right way and wrong way in creating customer segmentation in business to business, it takes time, analysis, tracking results, testing and monitoring outcomes and ROI to develop your ideal prospect profile.
For existing products and services the process is simpler and faster. You can start with your existing customer base. Based on your sales transactions history you can segment your current customers into various segments and identify effective and profitable market segments. You can also use the RFM analysis (explained in more details later).