The Challenges of B2B Market Segmentation

With the rise of high income and middle class families across all regions in the world, business to business enterprises can no longer ignore B2B market segmentation. Buyers are forming highly specialized markets and are equally seeking customized products, customer support and attention. This scenario was first witnessed in consumer markets, but it has now developed and spread to B2B market.

In fact, B2B market segmentation is something businesses can no longer ignore and expect to achieve positive results. What are the challenges B2B enterprises face with viable segmentation? How different are these challenges from the ones experienced in consumer market segmentation and what are the possible solutions?

Well, to uncover answer to all these questions, read this short article.

Challenge #1: B2B Markets Have Highly Complex Decision Making Units

Unlike in consumer markets, where buying decisions are simply made by one individual or several individuals, decision making in B2B markets are normally complex with rules that are intertwined and made by different individuals with varying levels of authority.

Further, potential buyers in these markets are multifaceted, oblique, ephemeral and complex. This creates the dilemma; does one segment these markets based on the companies in which decision makers work or do we segment based on decision makers themselves? In simple terms, it is rather hard to identify who exactly is the target buyer and who we should segment. A great solution to this dilemma is always to conduct B2B market segmentation research.

Challenge #2: B2B Buyers are More ‘Rational’

This is one of the views that are highly contested by behavioral scholars across the world. Would a consumer who buys a jacket for $3,000 because it appeals to him or her rather than because it’s worth the money make the same decision in the workplace? The answer is no, individuals who buy something because they like it buy based on what they need. They are more rational and objective. In practical terms, this means that segmenting B2B markets requires one to give attention to what business need rather than segmenting based on consumer segmentation audiences. This is where the challenge comes in; one has to identify what drives customers’ needs and because businesses are not individuals, this is not so easy. And yet, it is the only viable bases of segmenting B2B markets.

Challenge #3: B2B Products are Often More Complex

While most consumer products are normally standard, business to business products are usually tailored. This has led to the question of whether segmentation is actually possible in these markets. In addition, each product bought by a business is rarely being used in isolation, in most cases it is only a part of a larger system. This has made it necessary to include experts in the segmentation of these markets making the whole process costly. However, in business to business markets, there are a small number of customers who are important enough that they actually rise behind the setback of B2B market segmentation. They have to be regarded as a unique segment with their own particular needs. Otherwise, they will walk away and the firm will lose thousands and thousands of dollars in revenue.

In light of these challenges, the following strategies have been identified as the best solutions

  •  Price focused segmentation; companies in these markets will normally be small, on start up stages, running on low margins and view the product in question as low strategic value
  • Brand quality based segmentation; these markets will normally consist of businesses that are seeking the best quality products and are ready and willing to pay for it. These companies view the product in question as being one of high strategic value.
  •  Partnership based segmentation; mainly accounts consisting of firms that want a long term relationship based on reliable provision of quality products, after sales services, and timely delivery.

These 3 solutions addressing the challenges of B2B market segmentation have so far proved to be the best solutions. .

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Omri Erel
Omri is the Lead Author & Editor of SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.