Business Segmentation

 

Business Market Segmentation

Many firms will have business target markets in addition to consumer target markets. For example, consider a bank or an airline. As well as targeting individual consumers, a key part of their marketing efforts (and their profitability) will be obtained from business markets. There are some organizations that only pursue business markets (such as consulting firms), but generally most firms will at least consider targeting both individual consumers and businesses.

The approach to business market segmentation is conceptually similar to the approach for consumer markets. As we know, while business markets have less potential customers (as opposed to consumer markets),  B2B firms still need to be selective when determining their strategic approach to the market. This is because it is common for a B2B firm to have substantial investment costs and will often need to implement labor-intensive promotional strategies.

Why do firms need to segment business markets?

This is a good question, particularly as business markets have a much smaller number of potential customers, as opposed to some very large consumer numbers. However, firms that market to other businesses will typically have a smaller number of customers. These customers are, as a result, more important to them on an individual basis, so careful customer selection becomes more critical.

In addition, the effectiveness of promotional methods often differs in B2B markets. For instance, the expensive and time-consuming process of personal selling is commonly used in business markets. Some complex or expensive products may have a sales lead-time of several years, which means a team of sales people may easily invest 100s of hours in gaining a sale. Therefore, getting the target market right at the start of the process is also important.

 

What to review to understand business market segmentation?

The key sections to review for business segmentation are: