Segmentation in B2B markets

B2C companies often use segmentation analysis, a complex tool that divides the market into different segments, separated by consumer behaviour or need. The beauty of segmentation analysis is that you can look at the size, value and performance of these segments and decide whom to concentrate your efforts. Although segmentation analysis is a technique more frequently used by B2C companies, B2B firms can use a similar approach.

I am not an expert in B2B market research. But, I have great respect for a company that specializes in this topic, B2B International. It has a lot of experience working with business-to-business brands, and they found out that a typical business-to-business market has 4 segments:

  1. A price-focused segment has a transactional outlook for doing business. It does not seek any ‘extras.’ Companies in this segment are often small, working to low margins and seeing their product/service as “low strategic importance” to their business.
  2. A quality and brand-focused segment wants the best possible product and is prepared to pay for it. Companies in this segment often work to high margins, are medium-sized or large, and see their product/service as “high strategic importance.”
  3. A service-focused segment, which has high requirements in terms of product quality and range, but also in terms of after-sales, delivery, etc. These companies tend to work in time-critical industries and can be small, medium or large. They are usually purchasing relatively high volumes.
  4. A partnership-focused segment, usually consisting of key accounts, which seeks trust and reliability and regards the supplier as a strategic partner. Such companies tend to be large, operate on relatively high margins, and view the product or service in question strategically important.

This is a great start. Now, go over your customer database and see which client falls under which segment. You will quickly realize that all clients demand price, quality, service and partnership. That is not the point. The point is to find “the” pain point of every client. If you have difficulty deciding, you can always use this decision-making tool.

Today’s actionable tip: Don’t forget the 80/20 rule: 20% of your customers account for 80% of your turnover. Such key and large accounts should always be a segment on their own.

3 Comments

  1. Excellent and relevant article. The B2B space is becoming increasingly a B2H space – Business to Human. Segmentation is the beginning of migrating global/demographic based targeting to individual relationships with customers.

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