B2B International
B2B International

November 16, 2011

Conor Wilcock this week takes a look at the importance of segmentation in both b2c and b2b markets.

Whether it’s NEETs, “yobs” or “the leaders of tomorrow”, society’s youth must be used to labelling by now. But one particular nametag may have been slapped on unnoticed – “boomerangers.”

To shed some light upon the word, a boomeranger is defined as someone over the age of 22 who, fortunate enough to find themselves in full-time employment, has the (mis)fortune to move back home with his or her parents after a period of living independently. This group is growing in number, an unsurprising trend given the state of the economic climate. My first exposure to the concept of boomerangers lay in an article in Alert Marketing Magazine’s September issue:

“Thanks in part to the economic pressures of the Great Recession and its aftermath, boomerangers are a sizable population segment.”

Stumbling across the term was enlightening for me from both personal and business perspectives; after discovering that I had been bundled unknowingly into the Boomeranger Box, I read on with some intrigue. The core argument which emerges from the article is that this burgeoning consumer segment has long been dismissed as low priority; its warning to markets is to pay attention to a group whose purchasing power and influence is exponentially increasing.

I tended to agree with the article for two reasons. Firstly, it asserts that “boomerangers” was a more positive term for “young adults once stereotyped as indigent losers… [and] passive slackers.”Charming. Secondly, its argument that consumer markets should pay greater attention to boomerangers highlights the benefits of customer segmentation. Although the article focuses on consumer segmentation, some of the points it makes can (and should) be translated to business-to-business markets.

The main differences between B2C and B2B markets can be summarised as follows:

• Business customers are more driven by logic; consumers are more driven by emotion.

• Businesses are less fickle than consumers and are more driven by personalities and service.

• Business-to-business buyers are more long-term customers.

Given that a business customer is more likely to turn into a long-term client than a consumer, it is even more important to segment in B2B markets. A well-executed segmentation can be both effective and durable. That is not to say that companies should rest on their laurels; segmentations should evolve gradually over time according to changes in customer needs and behaviour.

The keys to using segmentation to maximise profits are outlined in a white paper by B2B International, Segmentation in B2B Markets:

“We have to be clever in targeting our offers at people who really do want them, need them and are willing to pay for them. Equally, we have to be strong in setting aside those who do not.”

Often, however, companies are reluctant to ignore such segments. Perhaps more dangerously, without an adequate segmentation, companies run the risk of dismissing priority customers as unworthy of targeting. Consider the Pareto Principle, which states that 20% of customers account for 80% of turnover. Imagine casting aside a key customer group, simply due to not recognising its significant purchasing power.

Despite our differences, we in the business-to-business environment can learn a lot from consumer segmentation research, such as that which exposed us mere boomerangers as a priority group. The alternative of course, is to sit back idly and watch as the “passive slackers” flee the nest and shop elsewhere. Perish the thought.