As a business owner, you’ve likely heard of B2B market segmentation. In fact, 70% of contemporary companies utilize marketing segmentation to better serve their customers. The statistic you really want to know about, however, is that 80% of those businesses increase their profits with these segmentation strategies. Effective segmentation research is one of the most powerful firms in a variety of sectors.
Segmentation is the process of organizing your potential B2B customerbase into groups based on factors like:
- Geography – Where they are in relation to each other and your company.
- Demographics – Their age, gender, income and other similar characteristics.
- Psychographics – Their lifestyles, opinions, interests and personalities.
- Behavior – Their prior spending habits and consumer preferences.
For companies that sell business-to-business (B2B), segmentation is especially important as it gives you a clearer idea of your primary audience and allows you to cater your products and services toward them. B2B marketing segmentation, however, takes keen customer research, effective planning, and coordinated organizational effort.
In this guide, we’ll walk you through the essentials of B2B segmentation so that your business can be part of that 80%.
The importance of B2B market segmentation
Effective customer segmentation for B2B companies can lead to benefits like:
- Improved targeting – When your audiences’ characteristics, interests and habits are all laid out for you, it’s far easier to pick a specific subset of clients to cater your marketing and advertising efforts toward. And, since targeted ads increase click-through rates (CTR) by up to 670%, an effective segmentation strategy significantly increases engagement as well.
- Enhanced messaging – Knowing your target audience tells you how to curate your messaging to them. Baby boomers, for example, prefer reading simple and straightforward benefits when learning about a product. In contrast, Gen Z is most receptive to customer reviews and influencer marketing campaigns via social media channels.
- Better products – When you segment your base, you’ll get a solid sense of what they’re looking for in your products. Then, you’ll be able to use this key insight to tweak your designs to perfectly match what your target audience is looking for, in turn garnering a…
- Better Return On Investment (ROI) – The figures don’t lie: nearly 80% of marketing ROI comes from segmented campaigns. Segmenting customers allows you to better focus your efforts, trim off any underperforming marketing efforts, and interact with a more engaged audience.
Types of B2B segmentation
There are four primary types of segmentation to think about. Here’s how each works and how they’re related to B2B marketing:
- Geographic – Geographic segmentation assumes that people from similar areas have similar needs—then, it leans on that knowledge to advertise to them. Catering to the interests of an area ensures an established target market with identifiable and specific needs. Geographic segmentation is how Hammersmith & Fulham Council raised awareness of a Clean Air Neighborhood in South Fulham.
Geographic proximity can be especially important for B2B companies that sell physical products or services with no means of digitally distributing their goods.
- Demographic – Demographic segmentation relies on repeat purchasing patterns based on age, gender and other similar factors. Learning that a specific demographic is particularly interested in your products allows you to focus your efforts on this most engaged customer segment.
The on-demand care app, companiions, for example, appeals primarily to older demographics and thus leans into that appeal in its messaging and advertising tactics. B2Bs can similarly refine their marketing approach as they learn more about their interested audiences and aim to appeal to their sensibilities.
- Psychographic – Psychographic segmentation isn’t as easy to peg down as other forms as it relies on dynamic lifestyle and personality traits that are liable to change at any time. Nonetheless, B2B companies often create buyer profiles detailing the preferences and opinions of their most likely targets in order to steer their marketing campaigns toward success.
- Behavioral – Researching past consumer behaviors—such as spending habits and purchasing preferences—can provide quality insight into future buying decisions. After gathering data through behavioral segmentation, you can then use this data to ensure consumers with similar purchasing patterns are grouped together.
Criteria for segmenting B2B markets
So, you’ve got the basics of B2B customer segmentation down, and now you’re wondering how to get started with organizing your customer base. For B2B businesses, some of the most effective factors to identify when segmenting your audience include:
- Industry sector – Are your potential clients in tech, agriculture, real estate or another industry? Sort your base by the type of work they do to determine how receptive they may be to your products and services.
- Business size – If you’re a small, up-and-coming business yourself, you’re not likely to land Fortune 500 company contracts right out of the gate. Determine how large the businesses in your potential market might be, then focus on appealing to those similar to your size or others who can benefit from your products and services.
- Geographic location – If you sell digital solutions, this one might not be as important to consider. However, if you deal in physical products or in-person services, you’ll want to consider other businesses’ locations to see if it’s realistic for you to actually work with them.
Implementing B2B segmentation: a step-by-step guide
After deciding on your criteria for segmenting B2B customers, it’s time to pull up your customer list and begin organizing them into related groups. To get started:
- Conduct – You can’t sort customers by size, location and other factors if you know nothing about them. To begin, conduct research into your base and gather information such as industry and staff count to inform your segmentation efforts.
- Choose target audiences – After your customers have been researched and sorted based on your predetermined criteria, decide which ones are the best fit for your products or services.
- Position your products – Are you catering to established, cash-rich legacy companies or smaller startups with lower operating capital? Are you trying to appeal to huge corporations with mammoth workforces or tiny teams in a singular office? After deciding on your target audience, price and market your products accordingly so that they’ll appeal to your intended segment.
- Establish a custom marketing mix – Your marketing mix is the range of channels you optimize to advertise to your target audience. From email and text to social media and content marketing campaigns, there are a plethora of platforms you can utilize to reach potential customers. Research which mediums appeal to your targeted segments, then plan out a marketing strategy that utilizes them to their fullest.
Tools and resources for B2B segmentation
If there’s one tool you should be utilizing to reach engaged and active members of your community, it’s Nextdoor Ads Manager. Nextdoor Ads Manager offers you key insights into local consumers, including information about:
- Household income
- Homeownership status
- Age
- Gender
- Other similar factors
This crucial data allows you to effectively segment your audience and cater your marketing campaigns to target your most viable customers. And, since Nextdoor is all about local appeal, you won’t be advertising to anonymous users half a world away.
Instead, your ads will go directly to relevant consumers in your targeted area. Furthermore, over 90% of these neighbors are the main shoppers for their households—meaning no upper management to veto their purchasing decisions if they like your products.
Common mistakes to avoid in B2B segmentation
Even when business owners are careful about their segmentation efforts and meticulous about crafting their campaigns, mistakes can still happen. Some of the most common pitfalls plaguing B2B segmentation include:
- Too narrow of segments – We’d all love to target our audience so specifically that 100% of customers convert on our advertising efforts. Zero missed conversions, however, can indicate too limited of an audience for your campaign. Houston-based real estate agent Michael Brombacher, for example, initially used Nextdoor to advertise to just a few small neighborhoods. As he increased his range to include 27 zip codes in Houston’s Inner Loop, however, he quickly saw the effects of expanding his market segment and experienced a 700% ROI.
- Low-quality data – Out-of-date addresses, incorrect demographic info, insufficient data management systems, and low-quality data can hinder segmentation efforts. To avoid improper segmentation, utilize a trusted tool that routinely updates its client info and makes concerted efforts to keep its data free from errors.
- A lack of end objectives – The whole point of segmentation is to support your B2B marketing strategy. With no plan on how to effectively utilize and advertise to your target segments, your market research will end up being nothing more than an upgraded address and phonebook. So, after partitioning your audience into segments, make a set plan for how you want to structure your marketing campaigns to best target your most viable customers. Having an actionable end goal can help turn your segmentation research into a powerful B2B growth strategy for your firm.
Use Nextdoor Ads Manager to segment and advertise to your audience
With B2B segmentation, it’s much easier to personalize messaging, develop products and create advertising campaigns for smaller market segments rather than entire customer bases. Plus, it can boost your ROI and drive conversions for your B2B company.
But effective segmentation requires accurate information about your consumer’s needs, wants, and pain points. Fortunately, there’s no better way of accessing relevant information about your local community members than with Nextdoor Ads Manager.
Nextdoor Ads Manager empowers your segmentation efforts by providing accurate, up-to-date information about your neighbors’ locations, incomes, ages and more. What’s more, a third of all American households are on Nextdoor waiting to discover your company. Claim your Nextdoor business page today, then utilize Nextdoor Ads Manager to maximize your reach.
Sources:
- Notify Visitors. 2024’s Segmentation Statistics Brands and Marketers Should Know. https://www.notifyvisitors.com/blog/segmentation-statistics/.
- Investopedia. Market Segmentation: Definition, Example, Types, Benefits. https://www.investopedia.com/terms/m/marketsegmentation.asp/.
- Gitnux. Targeted Advertising Statistics [Fresh Research]. https://gitnux.org/targeted-advertising-statistics/.
- Tech Target. Generational marketing explained: Everything you need to know. https://www.techtarget.com/whatis/feature/Generational-marketing-explained-Everything-you-need-to-know.
- Data Axle USA. 20 Customer Segmentation Statistics to Know. https://www.dataaxleusa.com/blog/customer-segmentation-statistics/.