Customer segmentation can be an invaluable strategy to organize the variety of needs within your target audience.
Not all your customers look, act, or think the same. Many of them have overlapping interests while, for example, living on opposite ends of the globe and dealing with different pain points. This is where a customer segmentation strategy perfectly fits in.
For B2B businesses specifically, customer segmentation is even more important as it allows for a deeper understanding of buyers, their challenges, and ultimately, their buying journey.
Let’s explore the types of customer segmentation and how you can manage it all with monday sales CRM.Try monday sales CRM
What is customer segmentation?
Customer segmentation is a marketing strategy that divides a customer base into different groups, or segments, based on shared characteristics like age, gender, interests, and location — just to name a few.
Segmenting customers is an excellent way to make data-backed decisions on product or service changes. It can inform several business practices from marketing campaigns to sales messaging.
For B2B businesses, it helps them tailor their sales processes according to a customer’s needs, offering customized solutions to their customers and building better relationships.
5 reasons to segment customers
By segmenting customers, you can customize your sales processes and tailor solutions to their specific needs. But the list of benefits derived from segmenting customers is much longer than that.
1. Improve sales efforts
Segmenting customers enables you to target them with more precision. As a result, you find your customers faster and enable a better customer experience. Segmenting also helps you pinpoint and meet your audience’s needs more efficiently, which also increases the odds of a sale.
2. Get the most out of your resources
Every business’ MO has always been to get the most return from the least amount of resources. Segmenting helps you do that. Instead of spreading your resources across your total addressable market (TAM) or even worse, just try to sell to anyone that may be interested in your product or service, allocating your resources based on customer segmentation data maximizes your returns.
3. Improve the customer experience
In a competitive market, the customer experience is a huge part of not only acquiring but also retaining your customer base. Providing a positive customer experience will lead to brand loyalty and allow you to market to your customers more effectively. Even with existing customers, understanding them well enough to segment them accurately and targeting them with relevant messaging improves their continued experience with your business and makes it feel more personal.
4. Improve targeting and messaging
By segmenting customers, you can improve your targeting and messaging. You can craft messages that are more relevant to each customer segment, increasing the chance of a conversion. This will allow you to get the most out of your marketing efforts, and increase your sales.
5. Accurately forecast future sales goals
Customer segmentation enables marketing and sales teams to forecast future sales targets with higher accuracy. This means budgets and campaign planning can be made more accurately, increasing your bottom line and making the most of your resources with each campaign.
Customer segmentation vs. market segmentation
Customer segmentation is a marketing strategy where customers are divided into different groups based on shared characteristics. These can include attributes like age, gender, interests, and location.
Let’s say you sell software to businesses—you might divide your audience into segments based on industry such as healthcare, finance, and retail.
Market segmentation, on the other hand, is a marketing strategy that divides a market into sub-markets or segments based on broader factors like customer needs, behaviors, and preferences.
Continuing with the example above, if you sell software to healthcare companies, you might segment your customers further based on the size of their organization, their budget, and their specific software requirements.
This allows you to tailor your marketing messages and customer support efforts to the unique needs of each customer.
Customer segmentation focuses on understanding customers as individuals and tailoring products, services, and marketing messages to meet their needs. Market segmentation focuses on understanding customer groups and tailoring products, services, and marketing messages to meet the needs of particular segments.
Both tactics are used to customize the customer experience, it’s just that the criteria for segmentation is different. Beyond knowing the difference between customer and market segmentation, it’s important to note how B2B and B2C segmentation differ and when to use each.
How B2B segmentation differs from B2C segmentation
B2B segmentation takes a different approach than B2C segmentation — though there are similarities. Segmentation for both typically revolves around the same basic motions:
- Identifying target markets
- Grouping prospects
- Creating marketing campaigns
However, customer segmentation in the B2B space is a bit more nuanced. This is because you’re dealing with factors including:
- Multiple decision-makers
- Fewer impulse purchases
- A longer buyer’s journey
- A more complex selling process
While you may be grouping prospects by similarities in both types of segmentation, the criteria you use to create those segments are often different thanks to the nature of B2B sales.Try monday sales CRM
What are the types of B2B customer segmentation?
Here’s a description of the different types of B2B customer segmentation criteria.
This type of segmentation focuses on technology-related factors, including specifics like applications used, data sourcing practices, or even operating systems. It can be used to target customers with specific technologies, which would denote tech-related needs that other companies may not have.
This type of segmentation is based on factors related to a customer’s business, including:
- Business size
- Number of employees
- Hierarchy data
- Annual ad spend
- NAICS code classification
Account tiering segmentation
How well do your customers match your business goals? What’s the revenue potential if you help them fill a need? With account tiering you’re able to segment accounts from most likely to buy to least likely. Segmenting your leads with account tiering — which is an increasingly popular approach called account-based marketing (ABM) — ensures you spread your resources across your most valuable accounts.
This type of segmentation groups prospects based on their needs. Need-based segmentation is a popular way of segmenting customers. Though it is more difficult to define. However, nailing your need-based segmentation and basing your sales and marketing campaigns on those comes with a lot of upsides.
For example, if you’re selling enterprise procurement software with sophisticated vendor management features, you’d want to segment your audience based on criteria like tech stack usage. You’d also want to further segment your audience to target enterprise organizations rather than SMBs.
Behavioral segmentationBehavioral segmentation watches for how potential customers are interacting with your product or content or even what they’re liking and reacting to online that’s relevant to your industry.
Are they visiting your pricing page? Did they just opt into your live webinar? Segmenting based on behavior ensures you reach potential customers when they’re showing “buyer intent.” With this data, teams can segment customers into campaigns designed to push prospects to a sale.
What’s an example of customer segmentation in action?
We can use geography to create an example customer segment. Let’s say we are selling enterprise B2B software that is only relevant in the United States. Once we know who our audience is and we’ve acquired a list of contacts, we could segment prospect accounts based on location, technographic data, and company revenue at or above 500,000,000.
This is only one example of how you can segment prospects. Thankfully none of this has to be done manually. Teams can use plenty of automated tools — including CRM and MAT systems — to help segment and run sales campaigns.
Customer segmentation and your sales CRM
Customer Relationship Management (CRM) tools can help companies better understand and segment their customer base. monday sales CRM lets you customize your tools to capture, track, manage, and automate communications to drive sales with a fully customizable work management platform.
Once your prospect list is segmented, monday sales CRM enables teams to merge contact data, run sales forecasts, and log sales emails once you integrate your email account. Buildable no-code automations make it easy to sell to your prospects with tailored messaging.Try monday sales CRM
Frequently Asked Questions
What criteria cannot be used to create a customer segment?
It is not recommended to use any criteria that could lead to discrimination or exploitation when creating customer segments. Additionally, any criteria that would be illegal or unethical should not be used, including things like race.
What is customer segmentation?
Customer segmentation is the process of dividing customers into different groups, or segments, based on shared characteristics like age, gender, interests, and location. Segmenting customers helps businesses tailor their offerings, messaging, and sales processes to closely target customer needs.
What are the types of customer segmentation?
The types of B2B customer segmentation can include technographic, firmographic, or even behavioral segmentation. Each type of segmentation is based on relevant identifiers that can be used to gain insights and target customers more effectively.