Is Your B2B Segmentation Fit for Purpose?

With B2B companies worldwide feeling the pinch, CMOs are now expected to have a more direct role in revenue generation according to a recent LinkedIn survey. Whilst there’s little sign that budgets themselves are declining, meeting these expectations will still be no mean feat: marketers have to grapple with optimizing the limited resources they have available, they need to deliver tailored strategies aimed at better engaging and converting customers, and they need to prove it all works effectively. It would be impossible to do all this successfully without an insights-driven approach; prioritizing who to target, where, and how, can all be informed through the use of segmentation.

At Phronesis Partners, we were curious to find out how extensively segmentation is being used today in B2B marketing, and furthermore to understand how well these models were being incorporated into marketing. In October 2024, we fielded a pulse survey to some B2B marketers in the US, and found that the majority of B2B marketers are using segmentation to inform their marketing strategy (76%).

Interestingly, we found that there was an upward trend in the take-up of segmentation as the size of the company increased: at one end of the scale, just 54% of companies with less than $250 million annual revenue used segmentation compared to 100% of companies in the $5 billion+ bracket. 

When we asked about how well these segmentations were being used in the US, larger firms ($500 million+) seemed to have a more negative view of their segmentation’s worth despite (or perhaps because of?) their more regular use. 

Specifically, 82% of larger firms always underpinned their marketing campaigns with segmentation (compared to 76% of SMEs), and 84% of larger firms evaluated the success of their campaigns for each of their target segments (compared to 71% of SMEs). However, only 56% of larger firms felt that their segmentation was “fit for purpose”, way behind that of SMEs at 79%.

The extent to which a B2B segmentation is “fit for purpose” depends on a number of factors:

1. Stakeholder commitment: In my experience, this is the most critical aspect - segmentations that are designed and implemented in silos are seldom embraced by and integrated into the whole business. Map out stakeholders, discuss objectives, and come to a consensus on the vision and purpose of the segmentation.
2. Alignment with business objectives: Once there is stakeholder alignment, everyone needs to agree on how the segmentation will support the overall business strategy and objectives, ensuring that it drives growth and profitability. It helps to have a clear set of success criteria and measurable targets in order to facilitate the evaluation of the segmentation at a later date.
3. Market understanding: A deep knowledge of the market is crucial, and this is where the insights engine of the business can really add value. Assets such as customer journey maps, brand health studies, customer feedback, and market intelligence can be invaluable to the development of hypotheses around customer and buyer needs, behaviors, and pain points.
4. Data quality: High-quality, accurate, and up-to-date data is essential for effective segmentation. If you are using survey data, ensure that your questionnaire is clear, concise, and well-tested. Be vigilant against fraudulent, fabricated or bot-automated responses. 
5. Segmentation criteria: The criteria used for segmentation (e.g. role, geographic location, needs, maturity, purchasing behavior, etc.) should reflect the business goals and market conditions. A recent client of Phronesis Partners found that their existing segmentation was ineffective at differentiating their go-to-market strategies. When we examined the attributes and needs of their customers, we found a diverse set of use cases, purchase drivers and expenditure priorities. These were used to redefine the client’s segmentation leading to a more personalized marketing approach that ultimately increased lead generation and improved conversion rates.
6. Actionability: in order for business to tailor their marketing and sales efforts, segments need to be accurate, useful and easy to understand. An actionable segmentation will help you to select and optimize the marketing strategies which are more likely to be effective with a particular group.
7. Scalability: The segmentation should be scalable and flexible, allowing the business to grow and adapt without needing to completely overhaul the segmentation strategy. Technology enablement is a key component here; accessing accurate and up-to-date information on how segments engage with your marketing materials, digital assets, sales teams, and products will help you continuously evaluate and adjust your segmentation in response to changing dynamics. 

Conclusion

In today's competitive landscape, B2B market segmentation is an effective tool in a CMO’s armory in pursuit of their revenue generation goals. By ensuring stakeholder commitment, aligning with business objectives, and championing data quality, B2B companies can create actionable and scalable segmentation strategies. In doing so, effective segmentation can help businesses to connect more effectively with their target audiences and drive better business outcomes. Now is the time to act and make your segmentation truly fit for purpose.