According to survey of large UK businesses – principally those that supply other companies and which have an average turnover of £1.9 billion – UK firms are lagging behind their European peers when it comes to employing customer segmentation within their marketing and product strategy. Just 32 per cent of British B2B companies use sophisticated segmentation that goes beyond simple firmographics, which is in stark contrast to Germany where that figure is over 60 per cent.
Segment smaller customers – The flipside of the 80/20 rule states that 80 per cent of customers account for 20 per cent of revenue, and are by definition comparatively small accounts. Being a large group of clients, often with conflicting requirements, means it is seldom possible to treat each one separately as their own subdivision. On the other hand, without it they are bundled into one group and may be displeased by offers that are irrelevant or generic. Countering this without using up a huge amount of resource is where targeted segmentation comes in.
The results revealed that the majority of UK B2B firms are not currently focused on acquiring the depth of customer information that is essential in understanding their needs, behaviours and attitudes to procurement. An absence of this knowledge suggests that companies are likely to struggle to accurately target their customer base with relevant segmented products and services – an issue that can ultimately affect their ability to gain competitive advantage, increase revenue and profit levels, and inspire customer loyalty.
Implement the strategy – The final, and arguably most difficult, task is implementation. Each grouping must be given a different offering that is recognisably individual and can be demonstrated as such. It’s also important that the sales force is engaged with the strategy and understands its benefits so the necessary questions can be asked to determine which segments customers, and potential customers, fall into. Appropriate solutions can then be directed at relevant subdivisions to satisfy needs and maintain customer retention.
Treat key accounts individually – The 80/20 rule determines that 20 per cent of customers account for 80 per cent of turnover, and for many B2B companies this amounts to just a handful of accounts. It’s important that main clients are provided with products and services tailored specifically to their needs, as their loyalty and continued business is vitally important in terms of business stability and future growth. As such, ‘business critical’ customers should be treated as individuals in their own segments.
Go beyond basic firmographics – Many businesses take the simple approach, sticking with basic firmographic groupings according to the size of the company, its geographical location, whether it is a private or public enterprise and so on. This is the equivalent of demographic segmentation in a consumer company. There is nothing wrong with this. Firmographic considerations are critical as easily recognisable attributes and are fundamentally important to a company’s sales and marketing strategy. Nevertheless, in many markets the needs of customers will crossover and it’s not enough to group them by such simple characterisations. Furthermore, the chances are that this embodies the majority of competitor strategies, meaning the achievement of competitive advantage is tricky with everybody using the same methods.
Differentiate by demand – It’s important for any company to undertake continual customer research to review what their customers look for in products and services – whether that’s looking at analytics or effective use of CRM systems – and respond by providing tailored solutions or products to meet their needs. Of course, it’s tough to get to know so many clients in such detail and this is where in-depth research becomes essential. A good analysis starts by revealing customers’ ‘voiced’ preferences – insights obtained by speaking to them in an unstructured manner, via detailed, one-on-one interviews or focus groups. These methods engage them in wide-ranging discussions, allowing the articulation of both current and anticipated future requirements in detail. A focus on such factors will pay huge long-term dividends in customer loyalty and market share. Satisfied customers tend not to look elsewhere.
Use behavioural segmentation – While identifying desires is the ideal, behavioural differentiation can also be a useful measure in providing important insights into what clients want and how to approach them. An example of this is to divide the market between companies that go out to tender with a closely scoped brief versus those that talk more openly with a supplier and ask for suggestions. By looking at behaviour and making these simple classifications, valuable insight into customer needs can be deduced to inform tactics. In the above example, this would imply that firms that exhibit the behaviours of a tightly scoped brief are more likely to be driven by price and basic transactions, whereas those that are more open to suggestions could place greater value on service and be prepared to pay for it.