Delivered November 14, 2019. Contributor: Sunali T.
To gain awareness of how B2B companies perform customer segmentation in the packaging industry and how these companies differentiate their offering for different customer segments.
Key Factors to Consider in B2B Segmentation
According to B2B International, there are key differences between consumer markets and B2B markets which must be considered in deciding on a market segmentation strategy.
- B2B markets have a more complex decision-making unit: it's important to decide on who exactly the target audience is (e.g the decision-makers, the companies themselves, etc)
- B2B buyers are more rational: the key is to identify the drivers of business needs (e.g company size, volume purchased or job function) for accurate segmentation.
- B2B products are often more complex: depending on the nature of the product, customers may need to be segmented by specific types of requirements.
- B2B target audiences are smaller than consumer target audiences: B2B markets generally have fewer needs-based segments, hence 3-4 segments are usually the norm.
- Personal relationships are more important in B2B markets: most B2B markets demand a level of personal service. The level of focus may vary from segment to segment.
- B2B buyers are longer-term buyers: B2B segments are less subject to whim and rapid change.
- B2B markets drive innovation less than consumer markets: B2B companies have more time to respond to trends and evolving customer needs.
- B2B markets have fewer behavioral and needs-based segments: compared to consumer markets, B2B markets have far fewer behavioral or needs-based segments due to less variation in needs.
B2B Segmentation Methods
A common approach of B2B market segmentation is based on company (customer) size since this influences the level of consumption. This can be further broken down into customers that are strategic to the future of business, those that are important, and transactional customers.
However, such Firmographic segmenting (e.g based on company size, products made), and convenience-based segmenting (based on geography, language, etc) are not sustainable and can be copied by competitors. Behavior-based segmentation (based on price sensitivity, delivery sensitivity, quality sensitivity) and need-based segmentation (security, power, esteem) while more challenging, are harder to copy by competitors and offer a more sustainable competitive advantage (see diagram).
B2B International further notes that behavioral and needs-based segments in B2B companies are usually similar across different industries. This form of segmentation often comprises of a price-focused segment, a quality and brand-focused segment, a service-focused segment, and a partnership-focused segment.
Evaluation of Segments
While segments can be decided upon using either judgment, analyzing the customer database, or using statistical techniques, it is important that the segments identified meet the following 4 criteria:
It is possible to determine which segments are worth targeting by plotting the segments in an X Y grid in order to justify resource allocation. The 2 factors that need to be analyzed are the attractiveness of the segment against the supplier's competitive position within that segment.
Only the project owner can select the next research path.