Satisfying people's needs and making a profit along the way is the purpose of marketing. However, people's needs differ and therefore satisfying them may require different approaches.
Identifying needs and recognising differences between groups of customers is at the heart of marketing. We cannot do everything, we cannot satisfy everybody; resources do not stretch that far. This means we have to be clever in targeting our offers at people who really do want and need them, and we have to be strong in setting aside those who do not. This early observation is fundamental, as it requires us to think as hard about where we don't want to sell our product as where we do.
In business-to-business markets the aim of market segmentation is to arrive at clusters of like-minded companies so as to allow your marketing/sales programme to focus on the subset of prospects that are "most likely" to purchase your offering. There is a very strong pressure to use segmentation in business-to-business markets to win a competitive advantage as there is often little to differentiate one product from another. Segmentation therefore links strongly with a strategy to achieve a sustainable differentiated position.
Approaches To Segmentation
The benefits of market segmentation are not hard to grasp. After all, the top 20% of customers in a business may generate as much as 80% of the company’s profit, half of which is then lost serving the bottom 30% of unprofitable customers.
The challenge is arriving at the most effective groupings. Segmentation can take the form of a 'demographic' segmentation, sometimes referred to as 'firmographics' in business-to-business markets. This type of segmentation is based on geography of location, size of company and standard industrial classifications (SICs). However, firmographics don't offer a sustainable competitive advantage that competitors cannot copy.
A more challenging market segmentation is one based on behaviour or needs. Behavioural segmentation segments on what companies buy, what companies produce and how companies produce it. Needs-based segmentation is obviously one of the most difficult to assess; what do companies want? what drives companies in their actions?
How B2B Segmentation Studies Can Help
B2B International and market research can help segment your market and so enable an effective marketing strategy, leading to competitive advantage in the marketplace. We will show you how to:
To learn more about how B2B International can help you get the most from your customers – and in return make your customers feel they are getting more value from you, contact our Segmentation Research Team.