Five reasons why you need to segment your B2B customer base
Segmentation is about dividing up your customer base (including potential/target customers) into defined groups which share certain variables. Each group or segment should be associated with specific needs, behaviours and characteristics that extend beyond the basics of geography and business size.
Now every business will have different primary reasons for segmenting their market, but here are five core reasons for most B2B organisations – read the full blog to learn more.
Defining what we mean by ‘customers’
In B2B market segmentation, a ‘customer’ can be defined as:
- a person, an individual – part of a wider team and broader decision making unit (DMU), defined by a specific ‘persona’
- a company account that is defined by its characteristics such as Company Size, Turnover, Number of Employees, Market Sector etc
For this blog, we’re talking about people/individuals who meet certain criteria ad are grouped into segments based on that criteria, which could be for example:
- Job role/function
- Level of seniority/decision making ability
- Needs and requirements
- Persona type
- Buying patterns/behaviour
Alternatively, when we refer to customers based on ‘Company’Account’ this is usually part of a wider account based marketing strategy which groups companies into segments based on company size, turnover, geographic location, sector, etc.
So why do you need to segment your B2B customer base? Here are five reasons:
To increase marketing ROI (get more bang for your marketing buck)
Here, you might focus your marketing spend on particular customer segments that you know have a greater lifetime value, or are growing faster than other segments. By doing so, and focusing on more profitable segments, you’ll see a greater return on your marketing investments.
To gain more profitable customers
In a similar vein to the above reason, by focusing your efforts, budgets and resource on acquiring more customers with characteristics that match those in more profitable segments, you will grow long-term revenue, lower the cost of customer acquisition, and focus more time on tactics to increase retention of your most profitable customer segments.
To improve targeting and effectiveness of marketing
The more relevant the message, and more targeted it is to a defined segment, the more attractive your offer is to specific customers – so the response to your fofer /campaign will be better as a result. This approach helps achieve better ROI when compared to a mass market approach, which is broader and less targeted, often costs more to execute – and response / uptake to your offer is lower.
To boost customer retention
When you tailor your marketing mix by segment, your customers’ needs are better met and satisfied, leading to improved retention, long term brand loyalty and revenue growth.
To increase market share
Segmentation gives you the ability to increase market share and achieve market leadership in specific segments, which improves the overall competitive position of the entire company in its relationships with suppliers, channel partners and customers. It also helps to strengthen your brand and influence to improve market share across the whole market.
Final Thoughts and Key Takeaways
The benefits of segmentation are clear – after all, the top 20% of your customers will likely generate as much as 80% of your profit – half of which can be lost if you focus your resources on serving unprofitable customers due to lack of segmentation and targeting.
By segmenting your market, you can continue to identify and meet changing customer needs, identify your most profitable customers, and target smaller groups – which improves the ROI of marketing campaigns, and increases the likelihood of successful product launches, campaigns and sales promotions.
- Segmenting your market increases the efficacy of marketing – it ensures a better allocation of your budget and resources,meaning marketing spend is prioritised to segments most likely to deliver a return
- Having more a targeted, customer-focused and needs-driven messaging and proposition increases relevance and value to your customer, to improve your ROI
- You’ll improve retention through the entire customer lifecycle: because customer needs and buying processes change over time, so you can target different groups (segments) with different products, messages and offers during their entire lifetime; guiding them from stage to stage by always having a specific solution to their changing need.