For B2B, the status quo of customer segmentation just doesn’t cut it
- Posted on July 22, 2019
- Estimated reading time 3 minutes
We’ve all heard of the Pareto Principle (otherwise known as the 80/20 rule), which states that approximately 80% of the effect comes from 20% of the cause. In business terms, it translates like this: 80% of revenue tends to come from 20% of customers.
So clearly, customer experience as a one-size-fits-all proposition is fundamentally flawed. The happier you can keep that 20%, the better for your business and the bottom line.
Standard segmentation doesn’t work for B2B
Performing segmentation to identify valuable customers is nothing new. But too often, businesses get it wrong by taking an inside-out approach and focusing on their own needs and preconceived notions of what customers want. Instead, a segmentation model should be built from the outside-in and aligned more closely to the needs of the customer.
While traditional customer segmentation models based on attributes like geographic area, industry and organization size (determined by revenue or number of employees) work well for B2C, they lack the depth of insight critical to dissecting a complicated B2B customer base.
Why is B2B segmentation so tough?
B2B customer relationships tend to be far more complex than their B2C counterparts:
- Buying structures and practices – These differ greatly from one B2B customer to the next. There is often a formal process and the involvement of multiple influencers and decision-makers
- Range of requirements – Customer needs vary widely; some need transactional support, while others seek long-term strategic partnerships
- Trust and expectation factors – Stakes may be high in terms of what you are delivering for a customer (for example, a communications solution in the health care space), so many B2B customers expect vendors to have in-depth industry knowledge and deep expertise. Also, a B2B buyer’s career and personal reputation can be affected by the purchasing decisions he or she makes
Digging deeper to define customer value
In the rapidly changing world of B2B, where companies are undergoing digital transformation, facing unprecedented competition, and coping with intensified expectations from customers and employees, a fresh approach to defining customer value is essential.
By looking beyond static revenue, industry, purchase indicators and other data-driven metrics you can dig deeper to truly understand what customers value. I suggest exploring some of the following, less tangible, customer attributes to help identify the cream of the customer crop for your business:
- The role technology plays in propelling their business transformation agenda.
- Their drive to innovate
- Their desire to co-develop and co-create with a partner invested in their business growth
- Their build, test, run, evolve maturity to realize value quickly and incrementally
Both sides win
This approach to segmentation isn’t easy. To be successful, it takes time, effort and a lot of open and honest discussions with your customers. Only then can you glean a deeper understanding of what drives their needs and motivations – then build appropriate experiences and solutions.
But the effort is worth it, and the payoff can be immense for both you and your customers. You will be able to identify those customers with whom you can truly partner for the long term, and they will gain a deeper sense of trust in your organization. That ultimately leads to deeper, mutually beneficial relationships. And that’s a win-win all the way around.