What You Need to Know About B2B Market Segmentation

October 5, 2021

B2B market segmentation helps segment prospective buyers into different groups based on shared characteristics, needs, and behaviors. It involves segmenting a heterogeneous B2B market into several smaller homogeneous markets based on current demand patterns and behavioral characteristics to find better and more efficient ways to meet existing demand or generate increased demand. However, b2b markets are characterized in many ways that make them very different from consumer-centric markets.

B2B market segmentation challenges

  • The decision-making units in B2B markets are complex
  • Products & services specific to B2B market segments are more diverse
  • Business-to-business audiences are smaller than in B2C markets
  • B2B buyers focus on longer-term engagements 

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Segmenting a B2B market for a new product

B2B market segmentation is a critical aspect of marketing success across industries for various reasons, more so while introducing a new product in the market. Despite its benefits, b2b market segmentation poses major challenges for businesses across industries. A systematic approach that offers detailed insights into different market segments and their needs can help ensure that products cater to the customers’ needs.

Identify and segment target markets

Identifying the niche market segments and defining the target market’s characteristics is a crucial step in b2b market segmentation. This market must focus on specific characteristics and not a broad classification of customer types. Once the target markets are defined, you can segment them into diverse groups based on shared characteristics, market value, and customer needs. While doing so, different types of b2b market segmentation must be considered depending on the product you want to introduce into the market.

Build buyer profiles for the product

Once you’ve understood the target groups, you can draw a complete picture of the end-user needs. Creating customer profiles based on geography, demographics, psychographics, company size, and needs will help align customer needs with your offerings and bridge the performance gaps.

Evaluate the attractiveness of each b2b market

You must evaluate each market segment’s attractiveness before you can select the most appropriate one for you to target. The analysis must consider factors that play a crucial role in determining the attractiveness of a market, including profits, distribution channels, and market size.

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Select the right target markets

Once you’ve evaluated the different segments, you can select the segment that you want to target. This is the most important phase because it is directly linked to your product’s positioning and customer requirements.

These steps form the basis of b2b market segmentation since they play a crucial role in shaping your marketing and product positioning strategies in b2b markets.

Factors to consider while implementing or revisiting your b2b market segmentation plan

 If you’re looking to revisit or implement a b2b market segmentation plan for your products or services, here are few steps to follow:

  • Start by setting objectives and goals for your market segmentation plan
  • Identify market segmentation variables and develop a hypothesis
  • Research and identify the ideal customer groups
  • Develop a robust b2b market segmentation strategy and select the target markets
  • Devise a go-to-market plan and a launch execution strategy

Case in point

In one of our recent collaborations, we helped a POS systems manufacturer tackle their market segmentation challenges. The challenge faced by the client was mainly because their offerings did not align with the needs of its customers. In-depth market segmentation analysis showed that their POS product line had little connection to the segmented needs of the target markets.

Like most POS system manufacturers, the client designed the product line by adding features to a stripped-down basic model. As a result, each feature addition has a direct impact on the price and the lowest-priced model had minimal functionality and could barely meet the needs of the target groups. Our experts analyzed the client’s target market, revealing the fact that despite the broad array of products offered, the POS product line failed to cater to the needs of major segments. Hence, it was evident that the product development strategy was devised from a logical viewpoint rather than a needs-based perspective.

Despite the diversity in the product line, the company failed to meet market needs, especially the needs of manufacturers and small retail segments. A robust market segmentation strategy and analysis of target markets enabled the company to compete in the whole market. Request more information on our services portfolio to find out how we can help you.

Market Segmentation: FAQs

What are the different B2B market segmentation methods?

Demographic, psychographic, behavioral, and geographic market segmentation are a few commonly used segmentation methods. In B2B markets, businesses must consider a few other factors like firmographics, technographics, business value, and customer needs. The other widely used methods include volume-based segmentation, product-space segmentation, and benefit segmentation.

What is a market segmentation strategy?

A market segmentation strategy is used to segment customers or a business base into homogenous groups based on demographics, customer behavior, psychographics, or a combination of them. It helps businesses cater to the diverse needs of their customers by grouping them based on requirements.

How to segment a target market for new products?

1: Identify and group prospects into segments

2: Group the new products into unique categories

3: Estimate the size of markets  and create a market-product grid

 4: Analyze and select target markets

5: Develop targeted strategies to succeed in each segment

How can B2B market segmentation help tackle the challenge of missing market expectations?

B2B market segmentation empowers businesses to make the most of their resources by providing reliable insights on market needs. Understanding your customer’s needs and behavior can aid the creation of meaningful sales and marketing strategies.

Market segmentation must ideally be the first step in marketing new products and services. Given the rapid increase in competition and market dynamism, market segmentation plays a crucial role in addressing customer needs across markets. The grouping together of homogenous segments with common needs makes it possible for businesses to set marketing objectives for each segment.

B2B market segmentation is crucial for devising successful campaigns with a razor-sharp focus on specific segments. If you’re looking to segment B2B markets, it’s crucial to remember that the structural and customer-centric aspects that impact profitability in B2B markets might vary. However, the market segmentation approach depends upon your business objectives and the industry. In conclusion, irrespective of the method, b2b market segmentation is likely to reduce your cost per lead by enabling you to focus your efforts on the right target segments.

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