Editor’s note: Conor Wilcock is research director at B2B International, a business-to-business market research agency, New York.
American firms are lagging behind European peers when it comes to employing customer segmentation within a firm’s marketing strategy, according to a recent survey of large U.S. businesses with average revenues of $6 billion, conducted by B2B International. Just 42 percent of U.S.-based B2B companies use sophisticated segmentation that goes beyond simple firmographics, which is in stark contrast to Germany, where that figure is over 60 percent.
Segmentation is closely linked to value marketing – it enables businesses to better communicate the value of its offerings by prioritizing key target audiences – and should be first on the agenda when it comes to informing marketing strategy. The best B2B customer segmentation research recognizes a client’s requirements because it gets as close as possible to the client. Here are four steps on how to successfully achieve this:
1. Look beyond basic firmographics
Many businesses take a simple approach, looking at groupings according to size, geographical location and so on. There is nothing wrong with this: these firmographic considerations are fundamentally important to a company’s sales strategy. But the needs of customers will cross over so it’s not enough to group them so simply. Furthermore, the chances are that competitors are using the same methods, making it difficult to achieve a competitive advantage.
2. Differentiate by utilizing qualitative market research
Using market research to inform segmentation is critical as it is tough to get to know so many clients in detail. A good analysis starts by speaking to customers in an unstructured manner – via one-on-one interviews or focus groups – in order to reveal preferences. This encourages wide-ranging discussions which allow customers to articulate their current and anticipated future requirements in detail. Focusing on such factors can pay huge long-term dividends in customer loyalty and market share as satisfied customers tend not to look elsewhere.
3. Contemplate behavioral segmentation
While identifying desires is preferred, behavioral differentiation can also be useful in providing insights into what clients want. By deducing behaviors and making simple classifications, companies can use the understanding of client needs as a key foundation to tactical strategy.
4. Execute the strategy
Implementation is arguably the most difficult task. Each grouping must be given a recognizable, individual offering that can be demonstrated as such. It’s important that the sales force is engaged with the segmentation strategy and understands its benefits so that salespeople are equipped to ask the necessary questions to determine which segments customers fall into. If this is achieved, the appropriate solutions can be directed at relevant groups to satisfy needs, and ultimately, maintain customer retention and drive revenue.
The research was based on an online survey conducted by B2B International in the U.S. and Europe with 226 decision-makers and influencers on B2B marketing.