It’s Time for B2B to Evolve
Many business to consumer brands (B2C) identify their target customer segments with customer segmentation analysis. Advanced analytics are used by eCommerce companies to segment the customer databases, and promote the right message, offer, or engagement approaches that drive loyalty, up-selling, or cross-selling.
For B2C, Customer Segmentation Analysis Grows More Sophisticated
Amazon’s extensive audience segmentation famously provides personalized offers. Amazon Personalize allows brands like Subway, Yamaha and Zola to make personalized recommendations leveraging Amazon’s machine learning algorithms.
Some brands create a customer advisory board made up of customers who are keen to give their opinions and drive the brand’s success. Customer segmentation analysis can be an important input for who is invited to the customer advisory board.
Many new products and services are designed with the target customer segment’s needs in mind, at times in a collaborative process.
With all these approaches, the link between customer segmentation analysis and growth strategy seems strong for many B2C brands.
Customer Segmentation Analysis in B2B Lacks Rigor
In practice, however, we find that is often not the case in business to business (B2B). Many B2B organizations define their customer segments only at the most basic level, by using spending levels and the customer’s industry.
Specific accounts are the focus, and customer segmentation analysis is either not performed or ignored when creating the growth strategy. So-called “whale” customers who dominate the industry can appear to be the best target, even if there isn’t a fit with the brand.
A B2B market segmentation example we previously explored had Coca-Cola as the whale brand, and The Weather Channel as the B2B company whose more insightful customer segmentation analysis showed a lack of fit.
Many times, customer segmentation analysis is a missing link in the brand’s growth strategy. Recent Insight to Action work confirms that customer segmentation analysis is still often overlooked in growth strategy recommendations.
Customer Segmentation Analysis Example: a Missed Opportunity
For instance, one B2B brand we worked with decided to enter a new direct distribution channel. Since they have a wide range of customers who use a variety of distribution channels, it’s helpful to prioritize which customer group this channel may be the most relevant for, along with the specific need state or situation when they are likely to use that channel.
In this case, we identified the need state as the “occasional” purchase, and the target customer is smaller than the firm’s traditional focus. The growth strategy allows the B2B firm to reach a new segment much more effectively in a specific situation, and also to avoid channel conflict as much as possible. While this may seem like an example of a successful application of customer segmentation analysis to growth strategy in B2B, we found that the management team chose to downplay this recommendation to focus instead on other priorities.
Insight to Action continues to see opportunities for B2B companies to use customer segmentation approaches and tools that are commonplace in B2C. We predict that first movers in this area will create an evolution across the entire sector, requiring other B2B firms to struggle to keep up.