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The Ultimate Guide To B2B Market Segmentation For 2023

Discover how successful B2B customer segmentation can help you reach new heights, in terms of demand, sales, retention, and revenue, in 2023.

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Your business has multiple buyer personas; you must make them feel special to ensure growth. 

But any B2B marketer who’s been on the scene for a while knows how difficult it is to scale customized marketing strategies. This is why B2B market segmentation can be a game-changer for your business strategy. 

B2B segmentation helps marketers accurately picture their ideal customer personas, categorize them based on commonalities, and create targeted messaging for specific parts of their customer base. This, in turn, leads to B2B businesses hyper-personalizing their communication, thereby resulting in a much larger rate of conversions. 

In this guide, I will cover everything you need to know about B2B market segmentation. You will also learn about the most popular and successful strategies and examples to help you better understand what makes your audience tick and serve them accordingly.

Let’s get start

What is B2B market segmentation?

B2B market segmentation for product and service-based businesses is breaking business-to-business (B2B) customers into smaller groups based on similar features or demands. It can help you better understand your customers and tailor your products, services, and marketing activities to each segment's demands.

When scaling marketing initiatives, you will inevitably have to —

  • Improve your strategies' efficacy to nurture leads, 
  • Optimize your communication channels for conversion, 
  • Foster long-lasting relationships with excellent customer support, 
  • Devise tactics to enhance customer loyalty and retention, and, 
  • Boost your reputation and revenue. 

You can achieve all of this simply by implementing B2B segmentation intelligently.

B2B segmentation often entails gathering and analyzing data on customer demographics, behaviors, needs, and preferences before identifying and targeting specific categories. A B2B company, for example, may segment its consumers depending on the industry, company size, region, or purchasing behavior.

Let’s look at an example of a B2B company that used customer segmentation to its advantage.

B2B Market Segmentation Example

To better understand how B2B segmentation can be applied to your target audience, look at this case study example that describes how the British Medical Association (BMA) reduced churn and exceeded their customer acquisition targets with help from Bright, a leading B2B marketing agency.  

While the BMA is already recognized as a leading trade union and professional association, offering support and resources to students and practicing doctors in the UK, they wanted to market themselves better.

By using a data-driven strategy for B2B segmentation and a more targeted, personalized, and behavioral-driven approach, the BMA hoped to explore a new approach to marketing and introduce fresh strategies that could help them better acquire and retain their consumers. That’s where collaborating with Bright made a huge difference.

What did Bright do?

Bright established a cross-capability distribution hub using an agile marketing methodology. Bright marketing specialists collaborated with key stakeholders from the BMA marketing team, including data analysts and members of the acquisition and retention teams to produce an acquisition and retention campaign that could satisfy business objectives.

The agile marketing center evaluated behavioral and usage data to identify four segments most likely to churn to enhance retention rates. Using this data, the two partner organizations developed new customer personas, journey maps, messaging, and nurturing programs to re-engage and demonstrate the value of BMA services to these target categories.

Bright examined their current segmentation strategy and subdivided these segments depending on their career stage and certification level to facilitate acquisition activity. This information was then blended with third-party data to create look-alike audiences, allowing the BMA to convert more previously cold and unknown audience members through better-targeted advertising.

The results? 

The BMA increased retention across the four major segments, as mentioned above, by 8% in the first three months of the campaign and exceeded its customer acquisition objective for medical students by 64%.

The BMA has since continued to adopt and develop current segmentation practices and create new categories based on major life and career milestones and behavioral triggers to boost engagement and reach for their marketing campaigns.

While market segmentation is more relevant and prevalent in the B2C industry, this example shows why it is just as important for B2B companies. 

Now, let’s find out how B2B customer segmentation differs from B2C companies. 

How does B2B market segmentation differ from B2C?

B2B Customer Segmentation

B2C Customer Segmentation

Multiple stakeholders influence the purchase decision. Hence, you require different strategies.

Single stakeholder is involved in most cases. Hence, easier to influence purchase decisions.

B2B products are complex and can take undue time and hassle to add or remove from the tech stack, therefore, they require a longer sales cycle.

B2C products are simpler and require a shorter sales cycle.

Requires more face-to-face interactions to build greater trust.

Requires fewer interactions to build trust with the audience.

B2B products have long-term purchase value and are often purchased repeatedly. This factors into the purchase decision.

B2C products have short-term purchase value, and buyers can select another option easily. This makes purchase decisions impulsive.

Smaller customer base accounts for the majority share of the revenue. Hence, customers must be dealt with the utmost care and excellent customer service.

Larger customer base. Hence, a few negative customer reviews don’t affect sales much.

Benefits of B2B market segmentation (+ Stats!)

Why should you segment your customer base? Here are the top benefits of B2B market segmentation, supported by the latest statistics:

1. It helps your business explore and break into new markets

Analyzing market segmentation data can assist you in identifying potential B2B segments in previously unknown markets to break into.

B2B audience segmentation can reduce client acquisition costs by using smarter segmentation and the construction of personas. MetLife, a global insurance company, employed sophisticated segmentation techniques to categorize its customers based on their behaviors and opinions. By focusing on “lookalike audiences”, their sales team had the least need for one-on-one attention, and it ended up saving them a whopping $800 million in what they called ‘the most significant change to the brand in over 30 years’.

2. It supports product development

B2B businesses that segment their target audience base are 60% more likely to comprehend their issues and worries better and 130% more likely to know the intentions behind their purchasing decisions.

Business-to-business market segmentation allows you to understand your ideal prospects better. The better you know your audience, the more effectively you can meet their demands. Then, use that knowledge to develop new product features suited to specific market niches.

3. It saves you money on marketing initiatives

A well-crafted B2B audience segmentation plan allows you to build targeted, personalized marketing strategies that maximize your budget. In addition, the power of behavioral segmentation can easily aid you in acting on AI-driven forecasts of transactional activity to predict the next purchase, churn risk, CLV, and the most efficient communication channel for each buyer.

A European retailer confirmed that customer segmentation helped him achieve 3%-5% better returns on promoted sales.

4. It helps you generate more revenue

81% of company executives concur that B2B customer segmentation is critical to driving higher profits, and the additional revenue recorded may be 10% or higher.

B2B Market segmentation is critical for building business acumen and sustaining a competitive advantage. It provides a deeper understanding of the market and assists businesses in identifying consumer segments with higher revenues, allowing them to conduct more targeted micro-marketing. This leads to decidedly inflated bottom lines.

Now that you know how customer segmentation can benefit your business, let's delve into the five B2B market segmentation methods.

Top 5 Methods for B2B market segmentation

1. Firmographic Segmentation

What demographic segmentation is to B2C businesses, firmographics is the same to B2B coompanies. Firmographic segmentation categorizes customers based on company size (measured by the number of people or annual revenue), company geography, industry, job title, and other attributes.

Firmographics are popular among B2B marketers since the data collection and use cost is relatively low. Furthermore, firmographics are simply translatable to the sales team; marketers may easily send the firmographic description of any specific consumer segment to the sales department.

Firmographic segmentation is most effective with top-of-funnel marketing strategies. While no two companies function alike, common difficulties eventually arise for organizations of comparable size, location, or industry. As a result, marketing initiatives aimed to boost brand awareness and bring new leads into your pipeline (such as blogs, webinars, video content, or even podcasts) tend to have the most impact.

2. Customer-tiering based segmentation

Customer-tiering ranks customers based on their significance to your company. It is characterized by their economic potential, lifetime worth, or how well they align with your future objectives. It evaluates a customer's or lead's importance based on how much value they can deliver. 

In recent years, many businesses have taken tiered market segmentation to a new level with account-based marketing. Rather than harnessing the power of big data and marketing automation to scale campaigns over an extensive range of prospective leads, account-based marketing focuses the efforts of both the sales and marketing teams on maximizing the potential return from a small number of accounts.

While marketing efforts have traditionally concentrated on lead generation activities, competent teams use big data to find the potential worth of existing customers. 

Demand generation marketers can use tiered segmentation to split existing clients based on their customer lifetime value (CLTV). The only potential downside is the assumption that all customers' needs in a particular tier are similar, just like in firmographic segmentation.

3. Needs-based segmentation

Needs-based segmentation is the most powerful method of segmentation. It groups the audience based on what they typically look for in a product. This could be a specific feature of the product or any other factor they consider while purchasing. This B2B audience segmentation model is highly precise and scalable. You can select specific characteristics of your products or services and then assign a score to each feature for each of your clients.

Data collecting may be difficult, and this score-assigning system may require data analytics. It is also difficult for the marketing team to communicate with the sales representatives who will be dealing with each consumer segment. However, needs-based segmentation can be really beneficial as you can deduce customer needs by identifying what drew them to a product. Needs-based segmentation is always suggested for companies with sufficient resources.

4. Behavioral segmentation

As the name implies, behavioral segmentation examines customers' inclination toward your product or service. You segment your audience based on their interactions with your company and try to determine whether a specific customer has become more engaged or disinterested over time.

Behavioral segmentation is frequently used with customer tiering to identify customers who should be pursued to extract more value from them. Marketers can uncover upsell opportunities and increase income from specific customers. Alternatively, consumers on the verge of leaving are provided preferential treatment to keep them on board.

Behavioral segmentation is a powerful supplement to tiered segmentation for demand-generation marketers looking to maximize the value of their existing customer base. Segmentation based on clean, richer data focuses your marketing campaigns and indicates the efficiency of a great digital marketing plan. 

5. Customer sophistication-based segmentation

B2B segmentation based on client sophistication entails splitting the target audience based on their product or industry knowledge. It allows you to personalize your campaigns to a lead's individual demands. Customer sophistication looks solely at a target company's awareness about the problem your product solves rather than their demands, firmographic information, or prospective worth to your business.

The biggest risk of customer sophistication-based segmentation is that marketers attempt to link it to the company or industry size in which they operate. Furthermore, making incorrect assumptions about customer sophistication may drive clients away rather than pull them in.

Following this, you will learn how to identify, segregate, and target your B2B prospects and customers into segments.

How to use data to identify and target B2B customer segments?

Once you have your data sorted, you can focus your efforts on identifying and targeting customer segments by following these steps:

1. Determine why you are segmenting your target audience base

When you clearly define the goals and objectives of segmenting your ideal prospects, you help guarantee that the segments generated are linked with your business's overall strategy and objectives and will support the achievement of those goals.

2. Decide on the segmentation criteria

Depending on the segmentation objectives, incorporate demographic, firmographic, behavioral, or needs-based factors.

3. Assess customer data

Collecting and evaluating customer data can help you identify specific trends and patterns related to target prospect profiles. This could involve a deeper understanding of customer demographics, purchase behaviors, engagement with the brand, or other important information.

To gather and analyze data, you must first determine which sources and processes you will use for data collection. You can turn to internal resources such as customer databases or sales records and external sources such as market research or industry data. These processes could include surveys, interviews, focus groups, and online analytics and metrics.

Now, you delve deep into the data you gather and then analyze it further to identify patterns and trends most relevant to your company and industry. This could involve employing statistical approaches, data mining, or qualitative methods such as customer feedback or interviews to understand better customer wants and preferences. 

Once you have concrete insights, you can implement them to inform company decisions. This could involve using data to establish customer segments, conduct account-based marketing and sales initiatives, or improve the overall customer experience.

4. Segment your customers

Based on the study of customer data, a firm can construct customer segments that reflect the diversity and complexity of its client base. This could involve splitting clients into segments based on criteria such as their demographics, firmographics, behaviors, or needs.

5. Target differentiated customer segments

Once you segregate the customer groups, target the segments with customized marketing and sales efforts. This could involve generating customized messages, offers, or experiences relevant and appealing to each category and employing marketing channels and methods most effective for reaching those segments.

Having highlighted the different methods of business-to-business market segmentation, let’s take a deep dive into learning about the top 5 examples of B2B market segmentation that can inspire how you segregate customers for your business.

Improve your customer journey with RevenueHero!

B2B customer segmentation helps you attract more qualified potential buyers and turn existing customers into brand evangelists. But is it enough to drive more sales?!

Once a potential buyer lands on your website, you must ensure them a seamless journey. And that’s where you need RevenueHero

RevenueHero is a lead qualification and distribution software that helps businesses double their form-fill-to-meeting booking ratio with data-driven solutions. Here are some of its features:

  • It streamlines the meeting booking process through automation, through processes like fast scheduling, personalized meeting distribution, account matching, and lead distribution, thus, saving time and providing real-time insights.
  • It allows sales professionals to determine the most effective channels for generating and nurturing new leads through lead routing analysis and provides customized templates for more effective communication.
  • It enables seamless CRM synchronization that allows sales reps to address every opportunity without fail, while delivering granular customer conversion rate metrics to help improve the company’s marketing campaigns and budgets.

Want to know more? Schedule a demo now!

Madhurima Chatterjee
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