Why B2B Market Segmentation Delivers Sales Growth

The time taken undertake a B2B market segmentation process is rarely wasted. It can be all too easy for a sales department to lack focus and to chase the easy target, the prospects the competitors chase, or the contacts that are always open for a visit without really thinking through which customers are likely to generate the best long term returns.

The result of trying to please / relate to as many customers as possible is an undifferentiated offering that actually fails to please anyone. The key is to focus on the business strengths and use this as a basis to identify the most appropriate target customer groups. The objective must always be to avoid competing on price wherever possible. In this post we cover how a B2B market segmentation process may work, its benefits and risks.

Segmentation offers an alternative to organising marketing effort around products, instead focussing on customers and their needs. It brings focus to the sales effort and negates the ‘me too’ approach that ultimately leads to ever increasing pressure on price. Appropriate market segmentation delivers growth and reduces waste on ineffective sales and lead generation activities.

The obvious question is if market segmentation is such a powerful marketing tool then why are most B2B markets ultra competitive with little differentiation? The answer, to be blunt, is that to follow through the B2B market segmentation approach takes courage. Segmentation often leads to a change in focus and that change is unlikely to deliver significant results in the short term. It can lead to operational change and that will inevitably causes some short term disruption.

Market and customer segmentation can be a complex (and time consuming) subject so it is often best to not to start unless willing AND able to allocate the appropriate resources and act upon the outcome. Buy in (particularly from the sales department) and inclusion is essential as is an appropriate risk assessment. The result of getting the market segmentation process wrong is ultimately lost customers and business.

Rules for B2B market segmentation

There are several basic rules for identifying a market segment:

  • Members of the segment must react in the same way when delivered with the same offer.
  • Each segment must be unique and able to be serviced by a unique marketing strategy.
  • The segment must be of sufficient potential size to justify that unique marketing strategy.
  • The segment must be reachable.

With segments identified it is important to examine each in detail and either modify or discard those that are not a perfect fit as failure to identify segments correctly can be a costly mistake.

When a final list of market segments are available then it is possible to devise a marketing strategy for each and to identify ideal target customers in each segment to attack. Sales resources then may be allocated to ideal customers with the most potential long term value to the business across a number of segments.

A Potential Market Segmentation Process

As a reference point It is useful to document the key existing assumptions about the business. Try to record what the business supplies (not in terms of products), who needs that product or service, why the products or services are needed and (crucially) why should customers pick the business ahead of the competition. The result of the B2B market segmentation process may show that a number of these assumptions are incorrect but it is important to have a starting point.

The next step is to define the overall market in broad terms such as size and geography but be careful with demographics and social information as this can lead to a mass of information that is difficult to interpret and clouds the main issues.

With the above in place the most critical part of the segmentation process can be initiated – the identification of basic customer needs within the market. At this point it is important to forget customers, competitors and products and to identify the real set of needs the business can satisfy within the marketplace.

There are many ways to identify an ideal target customers needs. Purchase history is a starting point but customer surveys, snooping on social media and other appropriate forums, reviewing complaints and returns, lost order / customer information and sales or marketing personnel insights can all help. The objective of the analysis is to identify the range of benefits being sought by the market.

With a set of needs identified it is possible to profile those who have each distinct set of needs, give them an identity and make them real. Only when this is in place is it possible to fit the business (and competitor) products into each group of needs and arrive at a set of defined market segments. The segments may then be evaluated against a set of basic rules outlined above.

Sales v Marketing issues

As noted above the market segmentation process will not deliver unless it is supported by higher management. There are risks and the process itself takes time and effort. B2B market Segmentation cannot be done in a vacuum without the help of a wide range of departments within the business.

To make the segmentation process work requires experienced strategic marketers who can suppress any preconceptions they may have and methodically work through the segmentation process. Crucially, it also requires marketers who can obtain buy in and co-operation from the sales department.

In many B2B businesses there is an underlying tension between sales and marketing and, as outlined in this post from Heinz marketing that is not necessarilly a bad thing, but if sales do not see the benefit of segmentation and the insights it delivers they are unlikely to change existing behaviours. Without sales buy in,  and the co-operation to deliver the customer insights the process requires, then success will be significantly harder to achieve.

Segmentation And The Impact On Lead Generation

With carefully constructed market segments and a detailed understanding of the customers and their needs within those segments customised lead generation processes may be developed for each segment. This both improves the effectiveness of the lead generation process and reduces the waste in sending messages to the group of customers that are never likely to buy.

Inbound marketing processes in particular can be fine tuned to deliver the most relevant information (content) to each ideal customer group by the most effective delivery method, reducing the workload on sales and leaving them free to build relationships and close.

Market segmentation then is far from easy and there is a risk of short term losses to achieve a medium to long term gain. It takes courage from senior management and skilled marketers to deliver. However, the rewards in reduced price pressure, a differentiated offering, reduced waste and sales growth from a set of clearly identified ideal target customers can be significant.

The Key B2B New Market Entry Challenges?

The key challenges associated with entering a new B2B market are not as obvious as they may seem. Yes, you need a killer product or service that fits perfectly with the need of the marketplace but image, relationship and your people are also key. We consider the key B2B new market entry challenges and suggest some potential solutions.

As one of the four routes to business growth covered in Ansoffs matrix the benefits of penetrating a new market are clear but to be a success requires:

  • A solid strategy.
  • A product / service the specifically addresses the needs of the market place.
  • The resources to implement the strategy.
  • The right people, signed up and committed to the cause.

Even with all the above in place there is a problem. It is almost certain there will be entrenched competition in the new market. The influence of their existing relationships with key decision makers and their standing in the marketplace should not be underestimated. People buy from people and there is always an issue of trust that any new supplier to a marketplace must overcome.

Entering any new market is a challenge but given it is one of the main routes to increased sales and growth it is a challenge that must be overcome. That said to try to enter a new market and fail wastes considerable resources and in some cases can be catastrophic for a business.

Each potential new market opportunity should be subjected to an initial screening process before diving in to a more thorough analysis. If the analysis shows there is an opportunity then a solid strategic plan that considers all possible scenarios, risks and resources is required before any attempt is made to move forward.

Assuming you have answered the key marketing questions surrounding your offer and the new market, stated your assumptions, identified risk, truthfully analysed your limitations and built your go to market plan then it is time to address people, relationship and image issues.

Who Will Deliver The Plan

Any strategy and plan is useless unless it is communicated appropriately to those tasked with making it happen, they understand it, are committed to it and are motivated to take it forward. In general people are resistant to change and with many years working in a particular market sector that they understand and are comfortable with may be resistant to stepping outside their comfort zone.

It is important to outline to all company personnel:

  • The reasons for attacking the new market.
  • The opportunity for the business and all those involved it represents.
  • The risks associated with simply focussing on existing markets.
  • An overview of the characteristics of the new market.
  • An outline of the strategic plan and timescales.

To overcome objections, address reluctance to change and secure sign up from all those involved. Not everyone will sign up, there will still be doubters, and strong leadership is required to ensure they are marginalised (or removed) so they do not destabilize the rest. New skills may be required or it may be necessary to hire those with some existing expertise in the new market.

Overcoming Entrenched Relationships

Any new market will have entrenched competition, often with many years’ experience of the market, a presence and a level of trust and existing relationships with the key decision makers. Any competitor with high levels of customer service, reasonable pricing and a progressive attitude to new products and solutions will be difficult to dislodge and all that can be done is to nibble away at their second tier accounts while building awareness in their key accounts.

The focus should therefore be on competitors that have an issue with service, pricing, new products or have become complacent. A focus on pricing should be lowest on the priority list but in any marketplace there will be the opportunity to attack on service and complacency. Potential customers will always be receptive to new solutions that address their needs.

To overcome existing relationship and market presence issues it is often best to attack new markets where the business already has some presence in the key customers, perhaps supplying minor items at a relatively low level. If this is not possible then finding a suitable partner (particularly a sales organisation) with existing access to key decision makers if often the key to success.

New market entry in B2B markets then is always a challenge but assuming the potential is researched appropriately, a strong plan is in place and the business has its key people on-board there will always be potential opportunities where entrenched competitors drop the ball.

B2B Marketing Strategic Planning – Is It Worth The Effort

The reasons for undertaking a B2B marketing strategic planning exercise are well established but too often I have seen the process hijacked or the outcome of the process sitting on a shelf gathering dust. Is it still valid to allocate significant resources to the traditional strategic planning process? Has the World moved on and is it now time for a different approach? We consider the issues.

The theory goes Strategy matches an organisations resources and capabilities with its objectives while considering the restrictions on those objectives imposed by the environment in which the business operates. Strategic decisions affect the long term direction of a business, they deliver control and focus by initiating a series of objectives, targets and sub plans that permeate down through an organisation. All great in principle but:

A 1st World War General said “no battle plan survives first contact with the enemy” (paraphrased)

Eisenhower said “plans are useless but planning is everything”

And Mike Tyson said “everybody has a plan until they take a punch in the mouth”

All should have known what they were talking about because if their plans went wrong it was possible somebody was going to die. For the record, I am a great fan of marketing strategy but to blindly stumble into the process thinking it is the cure for all sorts of business ills is a mistake. First, let’s look at some of the problems with the B2B marketing strategic planning process before suggesting a possible solution.

The Problem With Strategic Plans In B2B Markets

Of course, the relevance (or not) of the marketing planning process depends, to an extent, on the market in which a business operates but typical problems are:

  • Failure to analyse the situation appropriately.
  • Unrealistic expectations – Hijacking.
  • Flexibility of plan.
  • Communication / Drive / Relevance.

Analysis

Market analysis is the foundation on which all good strategic plans are based. However there are three main problems

  • Failure to allocate sufficient time and resources to the process.
  • Lack of focus.
  • A blinkered view.

Appropriate analysis is time consuming and, let’s face it, not very exciting. The time and effort allocated to the process is therefore often significantly less than it should be. To stress again, failure to analyse the situation appropriately will only ensure the B2B strategic planning process is built on false (or, at best, incomplete) data.

Given the complexity of the analysis task it is easy to lose focus on what is really important to follow through and what is not. While, as stated above, it is important to allocate sufficient time to the analysis process, time should not be wasted following blind alleys that yield no relevant data.

It is important to keep an open mind at all times and not make bland assumptions. It is all too easy to think, of course we know who our competition is, we know our key markets, our target customer base is clear, but are they? It is important to throw away pre-conceived ideas and assumptions.

Expectations

I remember it well. In my early marketing career I worked with the Sales and Marketing Director on building a strategic plan for a medium sized manufacturing business. We were given the organisations expectations (the result of a recent board meeting) by the M.D. We then worked hard on the process for several weeks, diligently working through the analysis, undertaking internal and external discussions and progressing each step of the process.

One of the final steps was to present the analysis, our conclusions and the draft plan to the senior management team. After a half day of discussion we were reaching a satisfactory conclusion when in walked the company founder who was a brilliant innovator and technologist who had realised where his strengths lay and had delegated Managing Director responsibilities several years earlier.

His strong view was the carefully calculated growth and turnover figures should not be ‘X’ but should be ‘Y’(where Y = X++). This view was based exclusively on a new technology (and potential product line) he had been working on. He forced through his view that a value should be added for this technology with the detailed planning to be added later.

The result was a plan with no foundation, unrealistic expectations and (crucially) no buy in. Looking back the suggested technology and product line was at least 2-3 years ahead of its time but the founder fail to explain / convince those around him of its benefits and the detailed planning to take the product forward, for various reasons, never materialised.

I wish I could say the above was a one off case but I have seen several similar situations since in a variety of organisations. Setting unrealistic target and outcomes is certain to ensure limited (if any) buy in by those who actually have to implement the plan and result in a complete waste of the resources utilized to put the plan in place.

Flexibility

Perhaps one of the major reasons strategic plans are not implemented is they lack flexibility. They follow a rigid path based on assumptions about what will happen in future and what the market and competition will do in any chosen situation.

Unfortunately, nobody can know what the future holds. We may wish to believe if ‘X’ happens the logical thing for our competitors to do is ‘Y’ but competitors are run by people and they are entirely unpredictable.

Perhaps this is the main issue that is eluded to in the above quotations. What happens when the unexpected happens? What happens if we take that ‘smack in the mouth’ If we refer back to the carefully crafted plan does it have the flexibility to cope or is it so rigid that it is no longer applicable to the new situation.

Drive

After all your time and effort on analysis and planning you may have a strong, well thought out, plan with sufficient flexibility to deal with the unexpected but unless that plan can be sold to the masses and buy in secured it will be a complete waste of time and effort.

The word ‘sold’ is the key term as it has to be a standard sales exercise, illustrating the benefits and quantifying ‘what is in it for them’. With buy in secured a plan champion should be appointed to the difficult job of ensuring the plan is a reference document utilized in all key business decisions.

Whatever sub plans and objectives fall out of the main plan must be progressed and followed through and that can be difficult given the many competing business priorities. Many good plans founder because once put in place they are not referred to or utilized and the business continues to bumble along as it did before.

A Possible Solution

One possible solution is to work the theoretical strategic marketing process but only to a point. Analysis, I suggest, remains key as without it there can be no understanding of where a business came from, the environment it operates in, its strengths and weaknesses and what events may impact on the business in future.

With analysis in place it should be then possible to create a series of scenarios of what could happen in future and a basic outline plan of what the business should do if a given scenario were to come to pass. The most likely scenario can then be selected and the remainder of the planning process undertaken.

A balance then needs to be struck between a plan with sufficient detail to flow down through the organisation but flexible enough to be adapted to accommodate minor unexpected events. Should the worse happen and events conspire to make the current plan worthless the planning document remains valid with other scenarios and basic plans already in place.

Which B2B Marketing Tactics Generate Most Sales Leads?

Note the word ‘tactics’ in the title. Way too much is written about single B2B marketing tactics that will produce a miraculous increase in the number of B2B sales leads in weeks (sometimes days). This is NOT one of those posts.

Expecting any B2B marketing activity to generate meaningful results in weeks from a standing start is a big ask. Generating quality sales leads on a consistent basis requires both a plan and a marketing process and that takes time. That said, the latest reports relating to manufacturing and B2B marketing from CMI and IDM make interesting reading.

Goals / Success Metrics

The Content Marketing Institute (CMI) report shows manufacturing companies tend to measure the success of their marketing campaigns via increases in:

Website traffic 67%.

Sales 48%.

Sales leads quality 46%.

Increased conversion 44%.

It may surprise some that sales is not top of the list but given the sales department and, to an extent, the entire organisation has an impact on sales numbers it is perhaps understandable. Success (or not) in the other categories can be attributed directly to marketing. Traffic and conversion are easy to quantify but lead quality is more subjective.

It is interesting the measurement criteria are not as soft around the edges as those outlined in previous CMI reports. They may be more high level but they are (in general) based on cold, hard fact.

The report (as you may expect) focusses heavily on inbound and content marketing but there is an obvious problem. It states average content marketing spend as percentage of total marketing budget is 22% – so where is the rest?

Outbound marketing Is Not Dead

According to Institute of direct marketing (IDM) report 49% of marketing budget spend was on traditional outbound B2B marketing tactics in 2014 including trade shows (at 15%), Email, direct sales, PR, telemarketing and direct mail. Traditional outbound marketing is therefore alive and well in the manufacturing sector. A fact that is often glossed over by those promoting the brave new world of inbound marketing.

It is interesting to note however that the report also shows only 20% intend to increase trade show spend in 2015 while spending on offline advertising, print advertising and direct mail is expected to decrease dramatically. Only 6% of respondents expect an increase in telemarketing spend. The IDM report also shows a marked shift in spend to inbound marketing as follows:

50% expect to spend more on content creation

45% expect to spend more on social media

40% expect to spend more on SEO

37% expect to spend more on website

This trend is supported by the CMI research

Inbound

The CMI report shows 82% of manufacturers are currently using some form of content marketing with their main objectives:
Brand awareness 89%.

Increased sales 85%.

Lead generation 80%.

Top content marketing tactics used by manufacturers are video (87%), e-newsletter (85%), social media, not blog 85%. Surprisingly case studies are lower in the list at 75% and Blogs at 60%.

What then is driving this move to inbound? Is it simply that businesses recognise the increasing resistance to outbound tactics? Or have they also recognised that decision makers perform detailed research into products, suppliers and services long before they engage with sales? Is it a sheep mentality? Or is there firm evidence of increased marketing ROI? I strongly suspect it is the latter but both the CMI and IDM report lack any data to back this assumption.

Conclusion

Much marketing commentary tends to focus on exclusively outbound or only inbound completely side lining the impact of the other. Inbound has both advantages and disadvantages, as does outbound. What is required is actually an lead generating B2B marketing process that capitalises on the strength of both to deliver on the objectives of the organisation.

Basic marketing principles should apply. It is essential to understand the business target customers, the best way to reach those customers and what B2B marketing tactics are best. The, are the marketing tactics inbound, or are they outbound? Discussion is irrelevant, it is the process that matters.

How To Win Over Competitor Key Accounts

You may have better products or services than the competition, you may have better service and support but the battle to win over competitor key accounts is never easy. Your competitor may be well entrenched and have key relationships built up over several years. Frustratingly, even when your competitor messes up you may still not get a chance.

The solution is not a quick fix and it is resource intensive but it can deliver results over the medium to long term. It requires sales working closely with marketing to identify key personnel to target and their needs.

There are two key issues at play. The first is relationships and the second is fear of change. Over time your competitor will have built close personal relationships with key influencers within the organisation. Even if your sales people can make inroads with one or more lower level people within the organisation it is likely the influencer will have an input before orders are switched away from your competitor and that is where any opportunity tends to come to a shuddering halt.

Fear of change is a natural human emotion and it can also have a real impact on overcoming the competition. A change away from something that may be working but is not ideal tends to be avoided because there is an in built perception that change will lead to a negative result.

Establish A Position To Strike When The Opportunity Arises

Unfortunately the solution will not deliver overnight results and it is a long game that can be resource intensive so it is best to make sure it will be worth it. There are two potential opportunities, the first relies on the entrenched competitor getting lazy. The second assumes that the competitor sales people and account managers cannot really get along perfectly with everybody.

Have the competitor sales people really built out their network to cover all the influencers in your target customer or have they left you a way in. If there is a gap to exploit how do you widen that gap to force your way in. The solution is content (information) but it must reach as many members of decision making team and key influencers as possible and (crucially) it must be matched to their needs.

A drip, drip approach is required so that the influencer recognises you are there, you know your business and market and that you are a credible source. Case studies are the holy grail of content but when they are not available any information that addresses your customers’ key questions or needs is helpful.

While it is important to deliver to all key influencers and members of decision making teams the key is to at least ensure you have a list of influencers (the low hanging fruit) you want to reach. Appropriate content is only part of the battle, it is also important that the content is delivered by the method that is most likely to be engaged with by the prospect.

Where do they look for information? Is it the internet? Is it industry publication? Is it white papers or blogs? Is a well-crafted ENewsletter likely to be read? Whatever channel is used content must be delivered via that channel.

The battle to win over competitor key accounts is never easy and there is no quick fix but by delivering valuable and engaging content to the key influencers your competitor has failed to cover you can at least give yourself the best chance over the medium to long term.

Using Scenarios in B2B Marketing planning

With the financial year end approaching for many manufacturing and B2B services companies many are considering an update of their existing plans or a complete new B2B marketing planning process. However, some perceive the planning process to be flawed and a waste of resources, perhaps rightly so.

In this post we consider the traditional B2B marketing planning process, some of its major flaws and one possible solution.

The Traditional Marketing Planning Process

B2B strategic planning processThere are many texts on the B2B marketing planning process ranging from basic to highly complex but my own favourite is the version laid out in Malcolm McDonalds book ‘Marketing Plans – How to Prepare Them How To Use Them’.

In short it outlines the process as Company objective setting, audit, analysis, define assumptions, set objectives, build strategies to achieve those objectives, estimate results, establish plans and build measurement processes. All perfectly logical and sensible but there is a problem.

Problems With The Standard Approach

A great quote from Mike Tyson ‘Everybody has a plan until they get punched in the mouth’ is quoted by Sir Lawrence Freedman in his re-thinking strategy lecture. He suggests to implement any plan successfully assumes future events fall into place as predicted and that rarely (if ever) happens in reality. While he questions the need for rigid plans he remains a fan of the planning process.

In practice the marketing environment is complex and worse still it is populated by people (employees, competitors, stakeholders) that are anything but predictable. Perhaps this is the reason so many strategic marketing plans end up on the shelf gathering dust. The well thought out plan and process fails to survive the first series of events that do not fit with what was predicted.

How Scenario Building Can Help

On completion of the analysis phase it is useful to try to fit the data available with a number of future scenarios (what happens if!). Some assumptions need to be made so scenario building is a far from perfect science but it does allow a business to at least be prepared should the predicted events unfold.

Business strategy experts suggest it is best to build up to four scenarios, at least one of which should be based on worst case events. It is then possible to play through these scenarios identify key risks and take appropriate decisions on how these risks may be mitigated. It is also possible to identify opportunities that may not be a priority but are worth further investigation.

Although a useful exercise the business still needs to move forward so it is necessary to choose the most likely scenario and complete the strategic marketing plan based on those assumptions. However, plans should always be constructed with a degree of flexibility so that they may be modified (or abandoned) if necessary. With alternative scenarios considered the business is then well placed to react as necessary and the strategic plan becomes a living document.

Are Manufacturing Business Marketing Plans Over Reliant On Digital?

When building manufacturing business marketing plans is there a danger of concentrating too much on digital and forgetting offline marketing? Small to medium sized manufacturing businesses are different. Their target customer base may be relatively small, key customer retention is generally all important and the sales cycle may be months, even years. Marketing techniques that work in other B2B verticals and B2C are often simply not valid.

Much published marketing advice seems to focus on Brand (you can read my rant on that subject here), digital marketing and inbound marketing. There is very little comment on what works for smaller B2B and manufacturing businesses. The information that is available generally tries to twist what works for B2C to the needs of B2B.

I am not suggesting digital marketing and inbound do not have a place because they certainly do but I happen to believe offline also has an important role. Two pieces of research in 2014 perhaps support my view. The first from Content Marketing Institute is focussed on inbound (content) marketing but still shows in person events (exhibitions / seminar) as the second highest most effective marketing tactic. The second from SoftwareAdvice showed Trade shows, referral marketing and in house Email as the most effective.

It is important for manufacturing businesses to take a step back, resist jumping on the latest bandwagon and assess what marketing process is really best. The starting point for that process has to be a strategic review.

Strategic Review And Marketing Planning

The exercise does not need to be complex; all that is required is a re-evaluation of what the business sells and to who. What need does the business products or service satisfy, who needs that product or service, who else satisfies that need and (crucially) why should prospects buy from the business ahead of the competition.

It is vitally important to identify what is to be pitched and to who before trying to evaluate the best way to reach them. Too much marketing spend is routinely wasted on the latest trend or what appears to be a good deal without evaluating if it will actually reach and engage the target customer base.

Target Your Potential Customers

With the pitch and the target customers in place only then is it possible to decide the best way to reach them. Social media works well for some businesses but not (in general) for B2B manufacturing businesses where the target customers are often not active on social media channels (LinkedIn excepted).

Your website may be great for existing customers who know it is there and use it as a resource but what about prospects? Can they find your website when they type relevant search phrases into a search engine? Of course, paying for SEO (or PPC) may solve that problem but both tend to be expensive so funds may be best spent elsewhere.

Blogging and all the other elements of content marketing are great but how do you ensure all that information is delivered to a point it has the best chance of being read and engaged with. There is not a lot of point in talking if nobody is listening.

What About Outbound Marketing

As stated above well-chosen exhibitions, seminars and workshops are all effective. Target customers are likely to be there, it is possible to interact with them and deliver the information they need. They can ask questions directly and objections may be addressed. However, exhibitions are generally expensive so it is essential to work out potential returns in advance and track the actual ROI.

There are those who try to classify Email as inbound. Call me a cynic but this is probably because it makes the inbound statistics more attractive. What is true is Email marketing is highly effective if it is content rather than sales message based. Assuming a high quality list and an appropriate CRM system are in place Email allows a manufacturing business to reach out to their customer and prospect base.

If a business has a good story, be it product or business related, then press coverage in appropriate publications still has high credibility and excellent potential reach to the target customer base. The only problem is how to effectively measure the impact. The measurement issue also applies for direct mail that can be effective as a last resort if there is no other way to reach the prospect.

There is however a common theme running through all the outbound techniques that should not be ignored and that is they all need some form of content. Without valid and engaging content they will not work and that leads to the conclusion that the best manufacturing business marketing process is an appropriate mix of inbound and outbound marketing techniques.

How To Identify Ideal Target Customers

Identifying ideal customer market segmentsThe time taken to identify ideal target customers in B2B markets is rarely wasted. It can be all too easy for a sales department to lack focus and to chase the easy target, the ones the competitors chase, or the ones always open for a visit without really thinking through which customers are likely to generate the best long term returns.

The result of trying to please / relate to as many customers as possible is an undifferentiated offering that actually fails to please anyone. The key is to focus on the business strengths and use this as a basis to identify the most appropriate customer groups. The objective must always be to avoid competing on price wherever possible.

Segmentation offers an alternative to organising marketing effort around products. Instead activity focusses on each market segment, their specific needs and how the business may satisfy those needs. Research shows that most markets can be broken down into between 5 and 8 segments

Market and customer segmentation can be a complex (and time consuming) subject so it is often best to not to start unless willing AND able to allocate the appropriate resources and act upon the outcome. Buy in and inclusion is essential as is an appropriate risk assessment. The result of getting the segmentation process wrong is ultimately lost customers and business.

A Potential Market Segmentation Process

It is useful to document the key existing assumptions about the business as a reference point. Try to note what the business supplies, who needs that product or service, why the products or services are needed, who needs them and why and why should customers pick the business ahead of the competition. The result of the segmentation process may show that a number of these assumptions are incorrect but it is important to have a starting point.

The next step is to define the overall market in broad terms such as size and geography but be careful with demographics and social information as this can lead to a mass of information that is difficult to interpret and clouds the main issues.

With the above in place the most critical part of the segmentation process can be initiated – the identification of basic customer needs within the market. At this point it is important to forget customers, competitors and products and to identify the real set of needs the business can satisfy within the marketplace. A customer does not need an iron (a product) they need a way to get creases out of clothes. If a new, low cost and efficient way to remove creases is found the iron is obsolete and those manufacturers who focussed on the product and not the need are out of business.

There are many ways to identify true customer needs. Purchase history is a starting point, the differences between the needs of the customer purchase decision making unitcustomer identification and analysis may be considered and / or existing customers may be surveyed. The objective of the analysis is to identify the range of benefits being sought by the market.

With a set of needs identified it is possible to profile those who have each distinct set of needs, to profile them, give them an identity and make them real. Only when this is in place is it possible to fit the business (and competitor) products into each group of needs and arrive at a set of defined market segments. The segments may then be evaluated against a set of basic rules.

Rules For Identifying Customer Groups And Segmentation

There are several basic rules for identifying a market segment:

  • Members of the segment must react in the same way when delivered with the same offer.
  • Each segment must be unique and able to be serviced by a unique marketing strategy.
  • The segment must be of sufficient potential size to justify a unique marketing strategy.
  • The segment must be reachable.

It is therefore important not to define to broad or too narrow a definition for a segment.

With segments identified it is important to examine each in detail and either modify or discard those that are not a perfect fit as failure to identify segments correctly can be a costly mistake.

When a final list of market segments are available then it is possible to devise a marketing strategy for each and to identify ideal target customers in each segment to attack. Sales resources then may be allocated to ideal customers with the most potential long term value to the business across a number of segments.

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5 Ways To Build Credibility In B2B Markets

Two key factors influencing purchasing deciUse testimonials to build credibility in b2b marketssions in B2B markets are credibility and personal relationships. Assuming appropriate promotional activity has built awareness in the marketplace then, in risk adverse B2B markets, credibility is a key distinguishing factor. This post suggests five possible ways for a business to build the trust of its potential customers.

Five factors that influence the credibility of a supplier are:

  1. Social proof.
  2. The quality of information delivered.
  3. Branding
  4. Activity in marketplace.
  5. Personal interfaces.

Social Proof

Robert Cialdini (among others) noted the concept of social proof. It states “one means we use to determine what is correct is to determine what others think is correct”. Case studies, testimonials and recommendations are therefore powerful weapons in the battle to increase credibility.

Content (information) marketing

Research shows that >60% of customers that leave a business do so simply because they do not feel valued and / or the supplier does not communicate with them on a regular basis. Quality, relevant (not sales copy) information both aids customer retention and makes a supplier more trustworthy.

In B2B markets members of the purchasing decision making team are much more likely to seek out the information they need than to wait for a supplier to push it their way. If the decisions makers most trusted sources of information (industry journals, blogs or trade association information) can be identified and useful, relevant information can be posted to those sources they can only boost the trustworthiness of a business.

Branding

What a business stands for, the way it works with customers, its profile in the marketplace are all parts of its brand. A number of research papers show a direct relationship between a positive brand image and the credibility of the supplier. However, it takes time and effort to build a brand and other elements in the list (content, promotional activity and personal relationships) all have an impact on the overall brand image.

Promotional Activity

Inbound marketing may be the accepted way forward for many businesses in B2B markets but there is little doubt outbound (advertising, literature, exhibitions etc) still has a major impact on branding and the credibility of a supplier. A B2B supplier that has a low market profile is likely to lose ground to its competitors hence the best approach is a well constructed strategy including the best elements of inbound and outbound marketing.

Personal relationships

A poor service experience can destroy trust in an instant. Any company personnel a customer may deal with can have a positive (or negative) impact on the business credibility. Knowledgeable employees who deliver good service build the brand and deliver a positive experience.

It can take months, often years, to build credibility in B2B markets but that credibility and trust can be destroyed in an instant by poor service or a negative employee experience. All businesses encounter problems at some stage, the ways these problems are dealt with can actually increase the trustworthiness of a supplier, or if the experience is negative, take years to recover.

Simplify The B2B Marketing Strategy And Planning Process

marketing analysis a key element of strategy and planningThe B2B marketing strategy and planning process can be both time consuming and complex for many manufacturing businesses. This post suggests a process to deliver a top level plan that addresses key issues with less time and effort.

For some medium sized businesses the time and resources are simply not available to put a formal B2B marketing strategy in place. For others the planning process produces so much data it is difficult to identify the key issues. The best approach is always to undertake a full marketing audit to ensure nothing is missed but a short cut approach can be to define:

  • Precisely what does the business deliver to its customers?
  • Why are those products or services needed? What needs do they satisfy.
  • Which customers (groups of customers) need what the business offers and why.
  • Given the offer and the need it satisfies who else satisfies that need
  • As there will undoubtedly be competition why should a customer pick the business and its offer ahead of all the rest?
  • How does the business make its offer know to identified customer groups?

Product or Service Definition

It is best to try to define what the business offers in terms of product or service in terms of what its benefits are to customers and what need it satisfies. It is all too easy to get hung up on products or services and fail to understand what the business really delivers to its customers.

Why Is The Product Or Service Needed

To be successful whatever a business delivers must satisfy some sort of basic customer need.  It is too easy to be superficial in the analysis and fail to understand what really drives customer purchasing activity.

Which Customers Need The Product Or Service

Follows on from the above as different customer groups (segments) may have different needs that are satisfied by different products or services. Some of those customer groups may be a perfect match with whatever the business offers, some may be less so. This analysis allows a business to focus its resources on the best customer groups. New customer groups to attack often also fall out from this analysis.

Who Are The Competitors

With the offer and target customer groups selected competitors may be identified. Competitors may be different for each customer group, new competitors may emerge and / or existing competitors may be less of a threat than expected.

Why Should Customers Pick Me

The previous analysis leads to this crucial step. If this cannot be articulated, written down and become the focus of future marketing activity then the business could be in a ‘me too’ position which is a dangerous place for any business.

How do I Raise the Profile Of the Business

The key issue here is focus. Promotional activity should be focussed on delivering the message on what makes the business different to the target customer groups by the most efficient means possible.

The above cannot be considered a replacement for a full B2B marketing strategy and planning process but it can be an interim step that delivers some useful insights.