If you’ll allow us to get a little fancy for a moment and paraphrase Sun Tzu’s Art of War: “A marketer that knows their target market and knows themselves will never need to fear the result of a hundred marketing campaigns.”

Understanding your audience is essential when it comes to marketing. It lets you create more effective campaigns your target market will respond to. It helps you know who your rivals are, so you know who you’re competing against for attention. At its most simple, it lets you know where your target market actually is (both physically and digitally) so you know where to devote your resources more efficiently.

Now all that’s fairly straightforward when it comes to B2C marketing. There are tried and tested methods for breaking consumers up into easy to understand audiences: demographics, psychographics, behavior, and even geographical breakdowns. Each of these methods have pros and cons, but at the end of the day they’re pretty simple to understand and develop things like audience personas for your marketing strategies.

Things are a bit more complex when it comes to B2B marketing. This is mainly because marketers are people, and it’s a lot easier for people to understand people than complex needs and structures of many different businesses, even within the same industry. Things get even more complicated when you’re attempting to market across industry lines.

In this article you’ll find quick primers on some of the most popular and effective methods for B2B marketing segmentation, along with their pros and cons so you can get started on deciding which would be the best approach for you and your business.

Geographical

First things first, there’s geographical marketing segmentation. Now this is more of a baseline before you start looking at other forms of segmentation, rather than being a discipline to itself. The country you’re planning on marketing to can have a lot of effects on what and how you market, particularly when it comes to B2B.

There’s the obvious:

  • What language do they use (sometimes the language of business in a country isn’t always the same as the official/most widely spoken language of consumers)?
  • What currency do they use?

And the less obvious, but no less important:

  • What laws are there in a country or geographical region which might effect your marketing? E.g. If you’re marketing SaaS based around data, are your methods of data collection and analysis even legal in that particular country/region?
  • What is the most common corporate structure in the region you’re advertising to? Do the decision makers you need to target have different titles?

Once you’ve got this out the way you can move onto more detailed degrees of segmentation.

Firmographics

This one is relatively straightforward. You’ve heard about demographics. Well what demographics are to people, firmographics are to companies. You look at what makes certain companies similar and you lump them together.

The most obvious way to do this is by industry, so you put all the tech companies together, all the cosmetics companies together, construction with other construction companies, etc. You’ve probably already done this if your company has quite a specific product range (if your company sells construction equipment, you aren’t likely to be looking at the fashion industry).

This is pretty simple, but you’ll need to break it down further. Geographic location is the next way to go (see above). Doing this by country is great, but if you can break it down even further into more specific regions, particularly in larger countries, it’ll be more effective.

For example, if you’re selling farming equipment in the US, they’ll need quite different equipment in Minnesota than in Florida, due to their different climates.

This still isn’t quite specific enough, so let’s go deeper and break companies down by size. A major corporation like IBM is going to have very different needs than a fresh-out-of-the-box tech startup, and even if you have a product that will benefit them both, they’ll respond differently to different marketing strategies.

A more specific way of looking at the size of companies is to look at their structure or status. Franchises will require different marketing strategies from independents, same with subsidiaries or outlets. A start-up is likely to be structured differently to a bluechip corporation. There are a lot more differences, as often there are legal definitions as to the status of a company which vary from country to country.

Now all of the above is pretty straightforward. It’s relatively simple to acquire the information for specific companies (these days most will proudly display this info on their company website or LinkedIn page). Things get a bit more tricky when it comes to the final, most specific level of firmographic breakdown: performance.

This is breaking down companies based on their growth over a certain period of time, their levels of revenue, their profits and losses, basically all the inner workings of the company. You can acquire this information from things like the stock market for publicly traded companies, but it’s not always available for newer or private businesses. However it’s the most specific, and potentially most fruitful degree of firmographic segmentation for a reason.

Businesses in the same industry, in the same place, that are the same size and structure, and have performed similarly will be pretty likely to have the same needs and respond to similar forms of marketing.

Pros:

  • Firmographics are pretty simple to understand and translate across different departments.
  • The majority of the information can be acquired for free or at very little cost.

Cons:

  • No matter how educated a guess you can make based on firmographics, you still have to make assumptions about your target market. Just because something works for one company, it's not guaranteed to work on a company no matter how similar they are on paper. Assumptions aren’t a great thing to build marketing around. As the old saying goes, “when you assume, you make an ass out of you and me.”

There’s a time and a place for firmographics. High-level marketing campaigns or raising brand awareness can be effective when based around firmographics. However, if you’re looking for something more targeted for segmentation, look elsewhere.

Potential profits

Now tell us if you’ve heard this before, but the end result of marketing is to get people to buy things. And one way of doing B2B marketing segmentation is to segment based on how much companies are likely to buy from you. This involves breaking companies up into tiers based on their lifetime customer value, which is, at its most basic level, how much profit you’re likely to gain over the course of your projected business relationship.

Now the type of lifetime customer value you’re looking for will depend on your own company’s needs.

Need some quick revenue fast? You’ll want to target big, upfront spenders (usually larger corporations with bigger spending budgets who will buy a large package deal).

Looking for a more sustained revenue stream? You’ll probably be looking at companies similar to, or smaller than your own, where you’ll develop long term partnerships or relationships.

Your company’s needs are probably more complicated than that, but you get the idea.

For some extra sophistication, you might also incorporate some ROI (return on investment) projections into the lifetime customer value calculations.

Pros:

  • You’ll be allocating your resources directly towards producing profit based directly on your company’s needs.
  • It can be a great jumping off point for Account Based Marketing systems, where you work directly to target certain companies based specifically on how much their acquisition as customers or clients will further your business goals.

Cons:

  • Once again you’re relying on assumptions. Marketing that applies to one company in a tier might not apply to another in the same tier. You will also be making assumptions regarding the potential lifetime customer value of your targets. If they don’t match your expectations you might not see a reasonable ROI.

Business psychographics

When it comes to consumers, psychographics is similar to demographics, but rather than sorting by physical things like gender, occupation and wealth, it’s more based on psychological attributes like behaviors, values, attitudes and aspirations (there’s a few more, but you’re not here for consumer segmentation).

It might seem a bit odd to apply psychological principles to B2B (since, well, businesses don’t have brains… yet *cue the ominous music*). You might think we’re talking about the decision-makers/buyers within companies, but while that is a good thing to be aware of, we are literally talking about the businesses themselves.

Now this process requires a much more in-depth analysis than demographics, as you have to really dig deep into individual companies and how they function.

  • How have they behaved recently?
  • What other companies have they bought from or partnered with?
  • What values do they present as a company, both in terms of what they’re doing for their customers, and potentially any causes they might support?

You should also pay close attention to their marketing and its tone of voice. The type of content on their site and social media can be a great help (even the type of content they like and share from other sources). Try and build a picture of what motivates the company and the direction it’s going in the future (e.g. are they focused on growth or cutting costs?).

Now, this all sounds pretty complicated but it can be extremely fruitful. Once you have this detailed picture of what’s driving the company and where it might be going in the future, you can identify potential requirements and pain points they might have to meet that goal.

And if you know that, you can work out exactly how your products and solutions address them and tailor your marketing accordingly. With enough information on different companies, you’ll begin to see similarities and therefore you can sort them into psychographic categories for your targeted marketing.

Pros:

  • Extremely detailed profiles allow for highly tailored marketing strategies.

Cons:

  • Collecting the required data can be time consuming and difficult without direct access. You’ll have to rely on (you guessed it) assumptions. Potentially, you could ask them directly, maybe in a survey, but you’ll be reliant on willingness to share that information with you.
  • Unless the companies you’re analyzing happen to be quite similar, you might need an extremely large data pool in order to start seeing trends that allow you to sort them into psychographic categories.
  • This data is difficult to translate into benefits across different departments. As it only really benefits marketing, it might not be worth the resources required if your revenue is low.

But which type of segmentation is the best? That’s the wrong question to ask, they each have a time and a place. It’s better to ask, which type of segmentation is right for me and my marketing goals? And that’s not a question we can answer for you.

Remember that cool quote we stole from an ancient Chinese warlord? Well here it is again with a bit of emphasis added: “A marketer that knows their target market and knows themselves will never need to fear the result of a hundred marketing campaigns.”

Step one before getting to know your target market should be getting to know yourself and the business you’re marketing for. What are yours and its strengths and weaknesses? What resources are available? What are you trying to achieve with your marketing? Once you know that, you can decide which type of marketing segmentation to utilize.

Have you had experiences with any of the B2B marketing segmentation methods we discussed? Maybe you’ve had successes with other types? Let us know!