The 3 Most Popular Methods of Segmentation for B2B

Customer segmentation is powerful, because it allows the marketer to draw an accurate downloadpicture of their customers, group them according to similarities, and devise pinpointed messages to specific segments of their customer base. Inevitably, these messages are personalized and tailored, which results in a significantly higher number of conversions. But there is no one single way of segmenting customers that is clearly the best option.

Depending on the products and brand you are marketing, one method of customer segmentation might prove more effective than another. Here are the most common methods of segmenting customers for B2B marketing, along with the pros and cons of each so you can make an informed decision about which one(s) to use.

1. Segmenting Customers Based on Firmographics

Firmographics is to B2B marketing what demographics is to B2C marketing: it is a method of segmenting customers based on the shared qualities (or demographics) of a particular segment. Firmographic segmentation groups customers based on things like the size of the business (either in terms of number of employees or by annual revenue), where the company is located (inner city Chicago versus rural Utah), what the competitive nature of their industry is, etc.

Firmographics are relatively inexpensive to collect and use for segmentation, and it’s not difficult to convey to the sales department what the firmographic description of any particular customer segment looks like. On the downside, firmographics have the same disadvantages as demographics for B2C marketing. Just because a customer is a 40-year-old female does not mean she wants to buy dish detergent, and just because a company has 1,500 employees and an annual revenue of over $5 million doesn’t mean they need a cloud service provider. The conclusions you can draw from segments based on firmographics are limited.

2. Segmenting Customers Based on Tiering

Customer tiering is a method of segmentation based on how well the customer matches the goals of your business. For instance, you can use customer tiering to segment customers based on how much revenue you can expect them to bring to your business during the duration of your relationship, or by how closely that customer matches your own sales and marketing strategies.

This is a forward-thinking approach to segmentation, because it ranks the importance of a customer or lead based on the most important factor — how much that customer can potentially bring in terms of value. The downside is that you can’t assume the needs of all the customers in a specific tier are the same, so it’s hard to develop a marketing message to suit any particular tier.

3. Segmenting Customers Based on Needs

This model segments customers based on their needs. Of all the methods of segmentation, this one offers the marketer the most accurate way to target their customer segments. It’s highly scalable, because the marketer can designate as many needs-based segments as they like. The drawback is that the needs of customers can be difficult to determine, or even to define. It’s also hard for marketing to express to the sales reps who will be working with each customer segment.

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