B2B Customer Segmentation
80% of all B2B buying decisions are based on the customer experience, and only 20% on the price. How do you create a great customer experience? You’ve guessed it – by customer segmentation, and this can only be done through segmenting your clients.
In the following post, we’ll discuss how you can start off with B2B customer segmentation.
We’ll give you an overview of how customer data should be collected and divided into groups. We’ll also share some of the best practices you should apply to your business if you want to know more about your clients.
All so you can join the companies who are already winning big at customer segmentation.
The Basics of B2B Customer Segmentation
Before we dig into the intricacies of B2B customer segmentation, let’s take a look at the basic classification of customer data.
Demographic data are one of the most powerful types of information you can collect on your users. These include:
Age – Some industries base their entire strategy on their customers’ age (think of beauty or supplement industries). However, age can also be useful for businesses that have nothing to do with retail.
For instance, you can use a different tone of voice in your email communication when you’re addressing Millennials, Gen Y, or Baby Boomers. If you’re a SaaS or tech-related business, this can do wonders for helping you onboard new users based on their expected exposure to new technologies.
Income – knowing your customers’ income helps you target them with the right type of offers. It will help you identify your High-Value Customers (whom we discuss further on in this post).
Occupation – if you’re in B2B, knowing who signed up on behalf of his/her company is absolutely crucial. Learning if it’s someone from customer success, marketing, or software development can mean the world of a difference for their onboarding and user experience. If you do it right for one person, you might convince them to get their entire team on board. After all, first impressions count!
Religion – ex. making sure you acknowledge your customers’ traditions and adjust your offer to it. An example of a great way to leverage this knowledge is offering special deals during Ramadan season.
Other types of data that you can read more about in our customer segmentation article include:
- Marital status
- Family size
- Social status
Some examples of geographic data worth basing your customer segmentation on include country of residence, city, and timezone. How is this insightful?
You can use this data along with demographic information like religion to better target your cyclical marketing campaigns. You’ll also know what time of day you can send out emails to boost open rates. And it’s just the tip of the iceberg!
Knowing how, when, and what your customers buy can do wonders if you want to increase your clients’ lifetime value. As a B2B business, you can also create a powerful anti-churn strategy for customers who are on subscription plans (read on to find out more).
It’s worth digging into your analytics panel, CRM, or session recordings to see how customers interact with your website. Pay special attention to how often your customers log in, whether they open your emails, or abandon their cart halfway through.
You might notice that there’s a segment of users who’ve never returned to your service after they’d created their account. And this calls for a user activation campaign!
Also, collecting behavioral data can help you in propensity modeling – an advanced method used to predict when a customer is about to take action.
This group is about understanding your customer’s values and beliefs. In retail, these might include political convictions or personal ideologies. However, when you’re dealing with B2Bs, it’s also about respecting how the business identifies itself and its role in society. Again, another group that might require some research, but will pay off!
Now that we’ve discussed the major customer segmentation groups, let’s take a look at the methods and tips you can apply for your business.
B2B Customer Segmentation 6 best Practices to Follow
#1. Look into user demographics AND firmographics
Firmographics are the term used to describe company demographic data. As you can expect, these include information like annual revenue or number of employees. Here’s a list of the data we recommend tracking:
- Annual revenue
- The number of employees
- Type of product – is the company B2B or B2C?
- Number of years in business – one of the metrics about a company’s stability
You can also start off your firmographics-based segmentation by using this free business survey template.
However, while your customers might, in fact, be businesses, you’d make a big mistake if you didn’t track your users’ demographics, too! In the end, it’s about appealing to the people who are using your product on behalf of a company.
Things like the tone of voice you use, aesthetics, or your users’ beliefs can all have a huge impact.
Make sure to also analyze your users’ job titles to establish if they’re decision-makers. This will come in handy when you want to identify upselling opportunities.
Speaking of which…
#2. Use the Recency, Frequency, Monetary (RFM) model to identify High-Value Customers
Let’s be honest – we all want to know which customers are willing to spend the most with our business.
So, regardless of your industry, here are three data points you should use to create a separate customer segment for High-Value Customers (HVCs).
The metrics include:
- When your customer’s last purchase was
- Purchase history – how many times they’ve purchased from you so far
- The total amount they’ve spent with your company
Identifying your HVCs means being able to exceed your most-desired target group’s expectations. If done right, this will bring in more recurring revenue for your business.
#3. Create segments based on company ownership and financial data
Firstly, we recommend you create segments for private, venture-backed, and public-owned companies.
If you’ve ever worked with these types of clients, then you’ve likely seen there’s a whole different hierarchy and – more often than not – different decision-making processes.
Secondly, if you’ve done your firmographics research, divide your clients per their financial data. This way you can adjust your offer and identify a group of customers who could be interested in higher plans. If you’re in SaaS, also make sure to check whether the company has recently received funding.
#4. Analyze your subscription plans and payment preference data
If you’ve never done customer segmentation based on these criteria, it’s time to reconsider!
We recommend that you segment users based on their subscription renewal periods (it’s our advice that you combine this data with NPS or CSAT survey results to know if it’s just a formality or a fight against churn).
#5. Run surveys to analyze your customers’ psychographics and satisfaction levels
As we mentioned earlier, it’s fairly easy to check a company’s corporate values. But the actual users on the account? Not that much. Neither can you understand their priorities when it comes to working with a company like your own.
And you know what they say – if you want to know something, you’re best off asking.
If you want your customers to evaluate what they expect from you on a scale from least to most important, here’s a free B2B customer satisfaction survey template. You can also create a similar survey to ask for any personal convictions of your users.
#6. Segment users based on their goals
Ask in a survey what your customers are looking to achieve. You can adjust your communication so that it leads them towards achieving their goals. It also works for taking more prospects down the funnel – for instance, by running a pre-sales survey before their demo call.
As you can see, there are tons of ways you can segment your B2B customers! Creating an effective B2B customer segmentation, however, doesn’t mean you entirely give up on analyzing who your single users are. Rather, it lets you see their behavior and goals through the prism of the company they’re using your services for.
Good luck & Have fun!