Market Segmentation: Unlocking Your Product’s Marketing Potential in B2B
If you have a pet and your home is littered with pet hair, you likely pick a “pet hair pick-up” product over a regular lint roller, even though they’re essentially the same thing. This is because the pet hair-specific product feels more tailored to your needs. Manufacturers understand that targeting this specific market can lead to higher sales.
The same principle applies in the business-to-business (B2B) world with vertical market segmentation for products and services that have broad applications across various industries. This approach combines the benefits of targeting specific market needs with the economies of scale of a general product. For many B2B organizations, vertical marketing offers significant advantages, especially for products that are commodities or soon might be. This article explores the importance of vertical market segmentation and how it enhances your marketing efforts by reaching the right customers more effectively.
Understanding Market Segmentation
Market segmentation is about identifying your target customers. Marketers typically do this by grouping potential customers based on shared characteristics, aiming to make marketing efforts more effective by addressing specific needs.
In business-to-consumer (B2C) marketing, segmentation often includes demographics, behavior, geography, etc. In B2B, segmentation is simpler due to fewer variables, typically including vertical industry (like healthcare or retail), organization size (such as revenue or number of employees), and geography (e.g., USA, Canada, Mexico).
Many companies mistake market segments for personas. While personas are crucial for positioning, they don’t help in estimating market size. Using industry, size, and geography makes market sizing straightforward. Personas are vital in crafting product messaging aimed at stakeholders, and vertical industry segmentation aligns this messaging with strategic issues prevalent in each segment. Together, these layers provide a complete value message for buyers and users in B2B.
The Role of Vertical Market Segmentation
Success in business often comes from designing products to solve specific problems for specific markets. While broad audience marketing might work occasionally, targeting a niche market actively seeking solutions increases your chances of success. Vertical market segmentation helps by grouping market segments based on industry, finding common goals and needs, and eliminating unnecessary qualifiers that might alienate potential customers.
Vertical Market Segmentation for Marketing & Sales
In marketing and sales, a well-told story often triumphs. Highly relevant messaging that addresses the specific goals and challenges of each vertical market makes products seem more valuable and unique. This coherence also helps sales teams maintain credibility and ensure consistency between marketing and sales messages, which can be a crucial differentiator.
For instance, a hospital’s VP of human resources would prefer a talent management solution that improves HCAHPS scores by finding and retaining top clinical staff over a generic solution. The tailored messaging directly addressing their needs is likely to be more compelling.
Vertical Market Segmentation for Products
For product development, there are two key aspects. First, new products often start with features common to every market and then add features specific to certain segments. Second, the combination of products into integrated solutions that meet broader, strategic customer needs is crucial. This requires a deep understanding of customer workflows across various functions and departments. Companies that excel in this area can create significant value by integrating functions like hiring and onboarding into comprehensive solutions.
In a market where products and services quickly become commodities, distinguishing your offerings and achieving aggressive growth goals is challenging. Communicating more relevant value propositions and helping customers integrate their workflows can drive significant incremental revenue.
Benefits of Vertical Market Segmentation
Vertical market segmentation offers several advantages:
– Better Use of Marketing Funds: Targeted marketing efforts reach a more qualified audience, making your budget more effective.
– Higher Return on Investment: Satisfied customers who see positive outcomes from your products are likely to become loyal, long-term clients.
– Higher-Value Solutions: Businesses find the exact solutions they need to grow and profit, aligning with your organization’s goals.
– Greater Understanding of Customers: Focusing on customer needs allows for the creation of more relevant and valuable solutions consistently.
Effective Marketing Strategies for Great Products
Vertical market segmentation enhances the effectiveness of your marketing budget and ensures your products reach the right customers. The key to a successful product marketing strategy is to focus on solutions and communicate their value in industry-specific terms.