Introduction to customer segmentation

Customer segmentation is one of the most important steps of setting a marketing strategy. In this primer, we answer the questions of what customer segmentation is, how you do customer segmentation and what the pitfalls to avoid are when segmenting your customer base as a marketing leader in a B2B company.

What is customer segmentation?

Customer segmentation is the process of dividing your target market into specific groups based on common characteristics. This allows you to tailor your marketing efforts to the specific needs, preferences, and behaviors of each group, rather than using a one-size-fits-all approach.

Why is customer segmentation important?

Customer segmentation ensures that you can target the right prospects with a tailored message that works for them. It helps you avoid wasting time and resources on marketing efforts that aren't likely to be effective.

By targeting specific groups with tailored messaging and offers, you can increase your chances of engaging them and ultimately converting them into customers.

How do you segment your customers in a B2B company?

There are a few key steps to follow:

Step 1: Define your target market

Who are the customers you want to reach? What are their characteristics, needs, and pain points? This should have its basis in research. The research can be a mixture of desk-based, qualitative interviews and quantitative surveys.

Step 2: Identify the key characteristics that differentiate your customers

This may include demographics (age, gender, income, etc.), but in B2B you are more likely to focus on firmographics (company size, industry, location, etc.) and buyer behavior (buying habits, preferences, etc.). Consider your customer set not just at an account level, but also by the individual decision makers – you are likely to need a different message for a technical buyer such as a Head of IT, than you will for a user or a strategic buyer.

Step 3: Group your customers based on these characteristics

This can be done using a variety of methods, such as clustering analysis, decision trees, or manual grouping based on your expertise and knowledge of the market.

Step 4: Develop targeted marketing strategies for each segment

This can include messaging, offers, channels, and tactics that are tailored to the specific needs and preferences of each group.

What are the common pitfalls to avoid when segmenting your audience as a B2B company?

Here are a few common pitfalls you should look out for when segmenting your audience:

1: Over-segmentation

While it's important to be specific and targeted, you don't want to create too many segments that become too small and unmanageable. This can lead to wasted resources and confusion.

2: Lack of data

In order to effectively segment your customers, you need to have access to relevant data. If you don't have enough data or the right kind of data, your segments may not be accurate or useful. You don’t have to go crazy (and it is easy to waste time and resources collecting too much data too early) but the segments should be defensible from the point of view of a robust research base.

3: Inadequate testing

Once you've developed your segments and messaging, it's important to test them to ensure they're effective. You are very unlikely to get your segmentation perfect on the first attempt and, even if you do, a buyer’s needs change over time. It’s better to get them 90% right and then test and adapt than it is to waste valuable time and resources trying to get them 100% perfect before launching.

Conclusion

By understanding the importance of customer segmentation and following the key steps, you'll be well on your way to developing targeted marketing strategies that drive results. In this primer, we’ve given an overview that can help guide your segmentation. If you need support or advice on segmenting your audience, please feel free to reach out using the form below

Primer on customer segmentation