B2B Customer Segmentation: What It Is + Best Methods

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What is B2B customer segmentation?

B2B customer segmentation is the act of grouping your target market into segments based on similar traits, pain points, and/or behavior patterns. You can then personalize customer interactions based on the content, channel, and timing each group prefers. By assigning a prospect or a new customer to a segment, you can also predict their preferences and behavior.

How B2B customer segmentation differs from B2C

There are a few ways that B2B customer segmentation differs from B2C, including the amount of stakeholders involved in a purchase decision, the length of the customer buying cycle, and more.

Dealing with multiple decision-makers

When you sell to a business, you talk to different decision-makers. One study found that six to ten team members are usually involved in a B2B purchase decision – and everyone has their own goals and challenges that they’re trying to solve for. (With B2C, you’re often dealing with a single customer.) 

Let’s say you’re in the business of selling productivity software to companies. You would need to appeal to the end-user’s desire for an intuitive interface, their managers’ reporting requirements, and a CFO’s need to justify spending.

Toggl, a time-tracking and productivity app, launched a campaign to attract creative teams in New York City, featuring different posters and billboards for their various personas.

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The visual on the left acknowledges just how busy creative workers can get with the tasks they juggle in a day. The one on the right speaks to team managers, and how it can be difficult to account for all the hours spent on a project. For both pain points, Toggl’s time tracker is the simple solution.

Multi-step buying process

We’re all familiar with the general outline of the buyer’s journey: a prospect becomes aware of your business, evaluates your offer versus a competitor’s, decides to purchase, and hopefully remains loyal. 

While B2C companies tend to stick to this funnel, B2B sales come with a few more caveats. For one, these types of B2B deals require internal buy-in and budget approval –  it’s not as simple as one person deciding to add an item to their cart. There’s also a lot of back and forth. As Gartner found in a recent report, B2B buying journeys are often non-linear. 

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As a result, businesses may offer free trials to help secure a B2B conversion. If the free trial goes well, then a business might decide to upgrade to a premium plan, add more end-users to their account, or even sign a long-term contract – making this a multi-step buying process. 

B2B customer segmentation helps businesses better tailor their sales tactics and marketing campaigns to different accounts. For instance, certain deals might have the potential for a bigger contract than others, requiring more time and bandwidth. Or perhaps different deals are geared toward different teams within an organization (e.g. an engineering team versus a marketing team), which would be interested in different product features or capabilities. 

Longer buying cycle

As mentioned above, thanks to the number of decision-makers involved in B2B deals, the buying cycle is longer than what you would see in B2C. For B2B companies, securing a new customer can play out over the course of a few months. 

However, a long sales cycle also lets you deepen your relationship with a prospect and learn more about their unique needs. As you gain a deeper knowledge of your customers, you can enrich their buyer persona profiles, refine your customer segmentation criteria, and hone your marketing strategy.

5 B2B customer segmentation methods

Different B2B customer segmentation methods serve different purposes, and come with their own limitations. We highlight five of these methods below. 

Firmographics

Think of firmographics as the B2B equivalent to demographic data – but instead of focusing on a single person, it looks at the entire business. Firmographic data includes a company’s location, number of employees, its industry, annual revenue, and so forth. 

You can get firmographic data from a company’s website, public records, online directories, or by asking the company directly. It’s quantitative, which means there’s no ambiguity in the information. It can also help create mutually exclusive segments – for instance, a company could either be an SMB or Enterprise, but not both. 

Technographics

With technographic segmentation, you group together customers based on the technology they use. To do this, you can create a survey or ask them directly about their software and hardware.

By analyzing customers’ tech stacks, you get an indication of what capabilities they currently have, and the types of systems they prefer. Going back to our productivity app example, if the business already uses a time tracker, you’d create campaigns to show why your app is better. If the business is still stuck with on-premise, legacy software, you’d emphasize the benefits of SaaS. If the company uses a cloud-based collaboration suite, you’d talk about how your app integrates with others to boost team productivity.

Hardware matters, too. Companies that allow employees to use their personal devices for work are more likely to be interested in your mobile app and cross-device synching. Those that use PCs would likely prefer to know how well your software works on desktop, and whether or not you have browser plug-ins.

Tiering

Tiering involves grouping customers based on how suitable they are for your product and how much value they can bring to your business. By tiering customers, you identify those whose needs, budget, and characteristics match the solution you offer. You can then spend more marketing resources on those relevant groups.

For example, your product might be more suitable for a growth-stage startup than for one that’s just coming out of stealth mode. You may want to pursue businesses that have achieved a certain level of technological maturity or ones that are still largely using manual processes.

Needs-based

With needs-based segmentation, you group customers based on their most significant pain points. B2B International, a market research firm, lists four of the most common needs-based segments in B2B marketing and suggests how to sell to each group:

• Price-focused segment: Sell the core product and don’t dwell on nice-to-have features that come with additional fees.

• Quality- and brand-focused segment: Offer the best option, even if it’s at a premium price.

• Service-focused segment: Emphasize the customer service you provide even after a sale.

• Partnership-focused: Establish your company as a reliable partner that will help the customer grow their business and achieve their goals.

You’ll usually learn which of these four types of needs matter most to a customer through sales conversations. As you gather enough data about your customer segments, you’ll find traits and behaviors that companies in each segment share, allowing you to predict the needs-based category of future prospects. Once you know what problems keep your customers up at night, you can create marketing materials that clearly present your product as the solution.

Sophistication-based

In sophistication-based segmentation, you try to discern how well the business understands its problem and what it has done so far to solve it.

Say you’re offering a cloud-based CRM that can automate tons of sales and marketing workflows. You’d market differently to a business that still uses spreadsheets versus one that’s using your competitor’s cloud-based CRM.

For the business that’s still using legacy software, you need to focus on education – demonstrating the benefits of automation, guiding them in transitioning to a new system, and assuring them of the security of cloud-based tools. For the business that uses your competitor, you’ll need to show how you can serve them better.