There are tons of ways businesses can break their audiences down into smaller groups or segments.  This is what is known as segmentation.  You can find out more about what is here and how it is used here.  Essentially, it is used to help businesses target their audience based on the similarities they share.  This is crucial as customers expect personalization more than ever before.  According to Infosys, 31% of shoppers want an experience that is more personalized than their currently is.  Segmentation is the very first step on the route to personalization.

When it comes to b2b organizations, customer segmentation can seem a little more difficult.  But, it is important to remember that business clients will also share similarities with each other and can be marketed accordingly.  Let’s look at the four major marketing segments, and how each one could apply to b2b.

The four types of market segmentation

There are four primary ways to divide your audience ⁠— by demographic, by location, by psychography, and by behavior.  Let’s explore the pros and cons of each and find out which one works best for b2b!

Demographic segmentation

Demographic segmentation is all about splitting audiences into the various groups that make up the population.  Factors like age, gender and job role can make a huge impact in decisions.  Apply this to businesses, and there are two ways to look at it.

  • The demographic of key decision makers in the business
  • The demographics that can be applied to a business ⁠— such as the age of a business, the industry it is in and the kind of revenue it sees.

The pros

  • Understanding the demographic of key decision makers in your key companies can help you target them in an appropriate way. Middle-aged women and young men, for example, may react differently to particular marketing messages.
  • The demographic of a business, on the other hand, can help paint a picture of what the company is like, and in turn what they might be interested in.
  • The data is readily available, easy to get hold of and simple to measure.

The cons

  • It is crucial to remember that similar demographics will not always have similar needs. It is predominantly based on assumptions, and these won’t always be correct!
  • It is a great starting point, but businesses will often need to delve deeper to get specifics.

Geographic segmentation

Geographic segmentation does exactly what it says on the tin.  Targeting customers based on their location is an age-old approach, and like any other segmentation style, it comes with several advantages and disadvantages.

The pros

  • It is easy to do ⁠— location information is simple to acquire.
  • It enables you to align regional sales teams and offices with prospects.
  • It gives you an understanding of culture, time-zones, preferences, and your competition in that area.
  • It helps you decide whether certain locations are worth investing in — are you getting much uptake? Is the geographic area driving revenue? Is a competitor already a market-leader in that region?

The cons

  • It doesn’t delve any deeper than location.
  • ⁠It assumes all customers based in a location have similar needs. This will not necessarily be true!
  • If implemented, it works best alongside another segmentation model, and not on its own.

Psychographic segmentation

Psychographic segmentation takes things a little further.  Considering a person or company’s beliefs, values, interests and attitudes, this approach helps you get into the head of your target audience.  And, you can even do this as a b2b organization!

The pros

  • It provides a deeper insight into customers’ minds, so marketing material can truly meet customers’ needs.
  • It enables marketers to connect with prospects on an emotional level.
  • It is particularly effective in the marketing of niche or custom products.

The cons

  • It requires a lot of research — whether through surveys, market research or marketing automation.
  • Research can be expensive and time consuming — and if shortcuts are taken to fix these problems, accuracy is often compromised, and this will mean wasted time and effort.
  • The differences in consumers can be so vast that it can be difficult to categorize.

Behavioral segmentation

Everyone behaves differently when it comes to their own buyer journey.  And that includes businesses.  From hesitant, price-conscious budget-holders to impulse buyers and big spenders, segmenting your audience based on how they shop and spend is a great way to ensure revenue.  You can find out more about the advantages of behavioral segmentation here.

The pros

  • It enables you to see the loyalty level of a customer, and tailor their experience accordingly — a long-term customer and a first-time buyer will expect different services.
  • Segmenting by purchase behavior enables marketers to send prompts that meet buyers’ needs; i.e. ‘the last few remaining’, ‘10 others are viewing this product’, ‘you may also like…’.
  • The ability to upsell and cross-sell improves with behavioral segmentation — it gives an insight into your customers’ buyer journey, so you know where your products fit.
  • Marketers gain an understanding of customer usage, time-based opportunities, and the benefits a customer is most interested in.
  • It has the potential to help with planning — what about your customers’ buying habits can you use to make predictions?

The cons

  • Buying behavior can vary significantly — reasons for purchase and the quantity/quality of purchases will rarely be the same.  So, it won’t always be 100% reliable!
  • A Business’s decision maker could change, and in turn so could their buying habits. Keep this in mind!

There is no right or wrong way to segment your audience.  At the end of the day, it is up to you as a business to decide which approach works best for you.  Use our pros and cons lists to help aid you in your decision-making process — and know that a combination of the above can work wonders.  The more accurate and in depth the segmentation, the more successful your marketing campaign is likely to be!

Segmentation is a helpful step towards maximizing the potential of  website personalization; which we know is the future of marketing.  Website personalization works by tailoring visitor’s experiences based on IP address, and ensuring what they see, read and engage with meets their needs.