Market Segmentation Strategies for B2B Technology Product Marketers

segmentations

As a technology company, you can’t possibly expect to satisfy the wants of all of your potential customers.It’s tempting to think you can lull all of them to buy and scoop up all the profits. But attempting to do so would exhaust resources. In fact, it’s so counter-productive that failing to segment the market will end up costing you money and possibly lead to failure of your product. If you don’t target your customer and provide solutions for a specific need you will end up stretching your resources too thin. You’ll end up with a product (and marketing strategy) that does too little for too many people.

So, that’s why we segment.

What we do is take our entire market and segment it into different populations which are based on various characteristics. We try to group the market into attributes that share similar needs or buying patterns. By segmenting , we’re able to focus only on marketing to those prospects who are plausible buyers, and hone our message to them. We focus. We own that market. This is how we insure the highest return possible on our marketing investment.

How do you segment? Where do you start? The first and most important step is to define your segments. While every business is unique and there are certain niche segments, there are some tried and true ways to segment based on historically successful classifications. Here’s are a few…

Depending on what you’re selling and who you’re selling to, there are several ways you might segment your prospect market.  Here are a few:

Segmenting by Size

Because the demands of business-to-business customers are so polarized, a common tactic is to segment markets based on company size. We do this because the thinking and strategies behind a larger company is typically radically different from the approach of a smaller business. Larger businesses typically employ a more formal procurement process — seeking the lowest bid possible. Small businesses tend to learn towards a more personal and inclusive type of business arrangement. Sometimes, leveraging basic information like the size of the company, its annual revenues, or the business’ own clientele roster will tell you how you may or may not work together. In some case you can be even more specific and count the number of installs of your software the company could potentially buy.

Size Segmentation Examples

  •  Targeting companies who see $500 million/year in revenue.
  • Only targeting the largest companies in your region based on number of employees.
  • I spent a long time in the contact center software space. We sold by number of agent “seats”. If a company had more than 500 agent seats they were “enterprise” and if they had less than 500 seats, they were “mid-market”.

Segmenting By Vertical

Does your product fulfill a common need that’s widely seen across an industry? Then vertical segmenting may be for you. Ineffective for most consumer markets, vertical segmenting is an effective strategy when you’re working with a niche product geared for a niche industry. Single industries like that and other industries commonly identified by Standard Industrial Classification (SIC) system are often identified as vertical segments. Determining the end function of your business customer tells you how and at what level in the supply chain your product will be used. And this knowledge drives how you position and market your product. It’s a simple question — how and by whom will my product be used? A hanger warehouse may only target companies in the retail industry, a graphic software firm may only target design departments or design houses, while a supply chain management developer may count freight companies among his prospects.

Vertical Segmentation Examples

  •  A navigation software vendor that only focus on the cruise or trucking industries.
  • A gauge manufacturer that only services the automotive industry
  • Selling exclusively to wholesalers in a vertical industry (combined segmenting)
  • Identifying a department function within a larger corporation

Segmenting by Geography

While geographic segmenting is often used to leverage characteristics shared by a population living in the same region, small businesses, those with capacity limitations, and consumer-driven companies often use geographic criteria to target prospects. As a New York-based company, you may not be able to service prospects west of a designated timezone. Or even more specific, you may segment your prospects to a select number of surrounding zip codes. Very plainly, where are your customers concentrated? Once you understand this data, you’ll no longer want to focus on any other geographic information. This same criteria can (and should) be applied to other geographic factors including population growth rates, economic factors, and isolated spoken language.

Geographical Segmentation Examples

  •  Introducing a unique product for the same unique geographic segment.
  • A promotional campaign targeting one region to increase sales.

Segmenting by Behavior

Very simply, this segmenting targets prospect groups based on their buying behavior. How are your customers using your product, how often are they using it, and what is the challenge your prospects face? Those questions, coupled with the propensity of your prospect to actually pull the ‘buy’ trigger, is the cornerstone of behavioral segmenting. Other behavioral segmenting rules may include brand loyalty, order sizes, and any purchase procedure requirements.

Behavioral Segmentation Examples

  • A software company that releases a product geared for early technology adopters.
  • A travel agency targeting travelers who prefer vacationing during the Christmas holiday.

How Do You Segment?

The core of market segmentation is targeted marketing. It’s about finding customers and narrowing the number of possibilities to make it easier and more effective for you to digest. Have are you segmenting your markets in a way that we haven’t discussed? Leave a comment below with your experiences!

4 Comments on "Market Segmentation Strategies for B2B Technology Product Marketers"

  1. Giles Farrow says:

    A segmentation I have used a lot is based on job function, role, or seniority.

    For example: selling enterprise software, you’ll probably have at least 4 sets of campaigns / messages aimed at different groups within the company:
    – business function: the department who’ll be using your software the most, focus on use cases, user benefits, features
    – IT: how it’s technically superior, integration options, reliability, security…
    – Finance: return on investment, compliance, legal requirements, financial credibility
    – Executive: strategic, case studies, overviews, hospitality :-)

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