“Market segmentation is a natural result of the vast differences among people.” – Donald Norman.
Let’s say you have an important sales pitch.
Would you speak differently if you were pitching to an elderly lady, or a young man?
How about if you were pitching to a married couple, versus a group of singles?
What if you were pitching to a city-based tech giant CEO, compared to a rural, small business start-up?
Do you see where I’m coming from?
Whatever service it is you’re selling, my guess is you would alter your tone, highlight different core values, pain points or product benefits.
I would hope so anyway, as that is what a great salesperson would do.
Because people are different.
Difference, of course, is something to be celebrated. Life would be boring if we were all the same, after all.
When it comes to selling, understanding your target audience and speaking to them in a way that will resonate with them is fundamental to your business’ success.
There is no ‘one size fits all’ when it comes to B2B marketing.
That’s why market segmentation is key if you want to improve your lead generation performance, boost your revenue and reduce your marketing expenditure.
Here, we will explain what market segmentation is, explain why it is so important and explore the different types of market segmentation strategies you can use for your company.
First things first, let’s define what exactly market segmentation is.
What is market segmentation?
Market segmentation is a method of dividing your target market into different groups based on their wants, needs, spending power, geographic location and many other factors.
Once you have defined these groups, it makes it easier for you to understand how they operate, which in turn makes it easier to deliver your marketing messages to them.
Why is Market Segmentation so Important?
Segmenting your target market into groups allows you to tailor your approach to make your marketing strategy much more effective.
Once you accept that your potential clients do not all behave in the same way, segmentation allows you to gain insight into their interests, purchasing power, values and needs.
This insight gives you the ability to maximise your return in marketing investment by refining your approach and creating tailor-made campaigns, targeting each group separately.
You can even use this newfound knowledge about your ideal customer profiles to create new products and services shaped towards satisfying their needs and solving their pain points.
Getting this process right can reduce wasted marketing spend and increase your bottom line.
The Facts Behind Market Segmentation
To be successful within your industry, we know market segmentation plays a pivotal role.
That’s because statistics are showing us that targeted campaigns are much more effective when it comes to ROI.
In fact, according to research conducted by Campaign Monitor, targeted email campaigns increased revenue by up to an incredible 760%
In addition to that, a McKinsey report showed an increase of 3-5% of retail sales for businesses implementing market segmentation as part of their marketing strategy.
So, market segmentation is certainly worth the effort.
But how do we determine which groups our customers should be divided into?
How to Segment Your Target Market
If you’re wondering ‘how do I find out all of this information?’, the answer is simple.
Ask your current clients.
That’s right, conducting surveys is a hugely important process for mass data collection.
You may also have information in your CRM system that you can couple with research to use to create an ideal customer profile for each one of your services.
Your task is to source potential customers within your target market that share combined factors.
These combined factors should make them more likely to purchase your service.
Luckily, companies like us here at Excelerate360 have been implementing this method for some time, so we have a proven model to follow.
Typically, there are five different types of market segmentation when dealing with a B2B audience.
These include firmographic, geographic, psychographic, behavioural and need-based subgroups.
Let’s look at each of them.
1) Firmographic Segmentation
You may have heard of demographic segmentation, which is a technique of dividing your target market by focusing on their age, gender, education, income, race, religion and ethnicity.
Firmographic segmentation is very similar to this but offers a slight twist.
The difference is that firmographic segmentation focuses on organisations rather than individuals themselves.
Data to look for includes the company’s revenue, number of employees, number of clients and whether or not they work remotely.
This data can help you segment your approach and again, help to determine their spending power and purchasing habits.
For example, you could target high earning companies with your premium services and create deals and promotional offers to attract smaller businesses with a lower annual revenue.
2) Geographic Segmentation
Geographic segmentation is probably the easiest group to organise and to conduct data analysis on.
That’s because it focuses on your target customers’ location.
But not only will you know where your customers are, you can use this information to focus on why you would address them differently in your messaging because of where they are situated.
For example, what time zone they are in would affect what time you would choose to reach out to them.
Other ways in which you would alter your marketing plans would include if they spoke a different language, how they differ culturally, what climate conditions they lived in, or whether the area was densely populated.
All these factors will help you to develop an understanding of your target market’s purchasing patterns and allow you to tweak your marketing tactics accordingly.
3) Psychographic Segmentation
Psychographic segmentation is one of the most important customer segments.
That’s because it allows us to really understand our ideal customer’s interests and life choices.
The goal is to uncover your ideal consumer’s core values, beliefs and future goals, to understand the ‘why’ behind their purchasing patterns.
While this may be the hardest segment to uncover data for, it may yield the best results as it allows you to understand your target market more than any other method.
When conducting research, ask your clients about the core values of their business.
What is their attitude towards mental health awareness? How do they view helping the environment? What is their forecasted growth within the next 5 years?
While some of this information may at first appear trivial, it can be the deciding factor when motivating a client to invest or not in your service, with how you reach out to them in your messaging.
4) Behavioural Segmentation
Behavioural segmentation looks into ‘how’ your current clients and potential prospects act.
How did they visit your site? Who are the decision makers are in the company? What platforms are they posting on the most? What do they like and share the most? Are they currently using any software?
This can be a difficult segment to monitor but can help to establish the habits of your prospects.
If they’ve acted a certain way in the past, it may just mean they are likely to behave in the same way again.
5) Segmenting by Need
No matter how tasty you try to make it sound, you won’t be able to sell a steak to a vegan.
So, stop wasting time with a broad marketing approach.
As businesses, we all tend to get a bit ‘needy’ from time to time.
There are problems and pain points which we constantly strive to overcome in order to continue our growth.
But not all our needs are the same.
And neither are the needs of your potential clients.
Segmenting your audience by dividing them into different groups will help you to personalise your message when you get in touch with them.
This will give you the upper hand in the sales negotiation as you will be able to explain how your service solves that very need.
If you don’t do this, and your marketing efforts maintain a broad approach, it may put off potential clients as they won’t feel you understand their wants and needs.
For your marketing messaging to work effectively, segmenting by need is a hugely effective tactic I implore you to implement.
Best Practice for Market Segmentation
The way to put market segmentation into practice is to follow three simple steps:
1) Research
2) Re-assess
3) Reach out
Research
Firstly, you must research the industry you want to approach and define who is your ideal customer profile.
You may have already done this, but look at your competitors.
What is their messaging? Who are they targeting that you aren’t? What pain points are they addressing?
Re-assess
It’s time to look internally.
Who are your best clients? Why does the business relationship work so well? What problem of theirs are you solving?
What services do you offer? Are they all aimed at the same ideal customer profile? What do your clients have in common?
This is where you should start to segment existing customers into groups from the five mentioned above.
One segment at a time, let data, not feelings, guide you in your decision-making process.
Reach out
Now that you have a real understanding of your potential buyers, backed up by data, it is time to tailor your messaging in a way that will entice them.
You should create separate sales funnels for each segment and test your messaging repeatedly.
Remember, this is not a quick-fix solution, but you will experience constant improvement if you stick at it.
Over time, you will build further research and may need to tweak your messaging as you go along.
The Bottom Line
It may seem daunting to restructure your entire approach towards gaining new clients.
But remember, segmenting will allow you to catch bigger fish, as it were, in a sea of potential clients.
The marriage of research, segmentation and personalised messaging will eliminate time-wasting, gain you higher value clients and increase your return on investment.
We’ve helped many businesses to do exactly that, so don’t hesitate to get in touch if you need a helping hand with your market segmentation.
