Fall 2018 Issue
A consultant may be skilled at what he/she does and perfectly grasp the fundamentals of business-to-business (B2B) and business-to-consumer (B2C) marketing through personal experience. But when it comes to segmentation, there is fine print worth considering.
Both B2B and B2C marketing take root from the same ground: goal and message definition, target market confirmation, and identification of channels to facilitate communication with a predetermined target audience. With strategic and focused work, companies can go on to convert these into actual customers. When it comes to segmentation between audiences the unique characteristics of the B2B audience must be thought out.
1. The needs of B2B buyers tend to be complex
Clients in a B2B environment are complex because their solutions are part of a much larger process. In a B2B system, clients are experts and vendors must ensure customer satisfaction during the whole buying cycle. Even when vendors offer a standard solution, many times customization is an important part of the B2B process. This applies to both products and services. Clients often have specialized needs that require individual attention and / or suitable modifications. This customization allows vendors to further adjust their segmentation process, based on the different needs or applications of similar clients.
The base offer remains the same, with adjustments made according to varying needs. This provides the advantage of a solution with multiple adjustments, each responding to the exact requirements of one niche market. Even when the requirements are complex the exact solution is available.
2. The decision process for B2B purchases involves a group of people
Decision-making is also different in B2B purchases. When individual people look for shoes, furniture, or even a house, the criteria to buy and the final decision rests with one or two people.
In contrast, the B2B buying process usually involves a number of decision-makers from different departments, each with particular needs and priorities. On top of that, the amount of money involved in a B2B purchase also differs from the usual B2C transactions.
3. B2B buyers are rational
B2B buyers are said to be more ‘rational’ than their B2C counterparts, an interesting and sometimes controversial conclusion. When an individual makes a purchase on behalf of an organization his / her reputation is at stake. Mistakes will lead to questions and consequences. Buying on behalf of an organization requires a clear mind and sound evaluation to separate ‘want’ from ‘need’.
Segmenting a business audience based on need is a more efficient approach than segmenting based on consumer audience criteria such as geography or demographics. It is critical to identifying the reasons why the client makes the purchase.
4. B2B companies need a lower number of clients to be profitable
A B2B target audience is smaller than a B2C target audience. In B2C sales the target market can include millions of potential customers, whereas a small number of B2B clients can generate 80% or more of sales. In the B2B process, a few clients can make a huge difference.
5. Long buying cycle
In most B2C transactions, clients make purchase decisions within days or even minutes. The buying cycle in B2B companies is much longer, ranging from a few months to years. The mechanics at work in B2B environments are elaborate: select solutions, track down the most appropriate vendors as well as clarify every advantage and disadvantage of the solution. This is followed by discussions about options and implications with the team. This process takes time.
Considering that the B2B buying process may take years, companies tend to repeat purchases from the same suppliers over time. These suppliers can become critical to the company’s long-term performance. The client also comes to rely on maintenance or after-sales service. Over time, the buyer and supplier develop a relationship of trust. The supplier develops a deep understanding of the client’s requirements and a skill set particular to that client’s needs. This can result in a deeply loyal relationship.
B2B segments do not change quickly. When an accurate segmentation is in place, its evolution is slow and becomes a strategic, long-term tool. However, companies still must pay attention to changes in the segments, to ensure that the offers, messages, channels, etc. remain relevant as the segment evolves.
As shown here, the concepts behind segmentation of B2B and B2C start from the same ground, but the particulars in each target audience call for a different strategy to connect with them. When a company strategically identifies a narrow group of clients as its target market, its sales and marketing efforts become more effective. To do so, the company needs to understand its clients and prospects, and connect with them at the right time, with the right message, through the right channels, in the most cost-effective manner.
Dafne Orbach is a Certified Management Consultant (CMC) with 20+ years of experience developing new markets for niche solutions in the areas of information and communication technologies (ICT), cleantech, bioscience and industrial manufacturing. Dafne is a specialist in need-based market segmentation, micro segmentation, market intelligence, definition of marketing strategies, implementation of integrated campaigns, lead generation, and content marketing in niche B2B markets.
Dafne’s proprietary process allows clients to successfully identify and connect with their high-quality leads in narrow target audiences. Check here for what some of them say. To learn more about Dafne visit her business website and subscribe to her periodic e-newsletter. You can connect with her on LinkedIn and Twitter.