Industrial Marketing

B2B market segmentation in the industrial sectors

Understanding industrial market segments enables you to interact successfully with target audience and stay ahead of industry developments.

Homepage » Industrial Marketing » B2B market segmentation

Pinterest LinkedIn Tumblr

Industrial organizations belong under a variety of industrial sectors depending on the items and services they sell. Understanding B2B market segmentation enables you to interact successfully with their audiences. Also, you can stay ahead of industry developments and watch competitor organizations.

Knowing and understanding the industry you want to sell helps you comprehend the accurate selling strategies as an industrial B2B salesperson. In this post, I’d like to describe industry types and describe the various ways of industrial B2B market segmentation. But first, let’s start with the industrial market model.

B2B market segmentation

What is the industrial market?

Before learning the functions of B2B market segmentation, we have to grasp the industrial market term. The industrial market definition can be explained as; A collection of businesses that share comparable business operations and products (industrial goods or services). Company executives may classify their company as belonging to a particular industry based on the source of a large portion of their revenue.

The industrial market is a business field in which one company sells various types of industrial goods or services to another company. Additionally, it is referred to as a business-to-business (B2B) market or a supplier market. In this sector, companies acquire industrial products from other businesses to utilize in the manufacturing process of various final products.

The industrial market does not fulfil the requirements of the general public seeking finished items but rather supplies types of industrial goods and services needed for the manufacturing of a particular end product.

Identifying target B2B markets

Characteristics of industrial B2B markets

In the industrial B2B market, there are a limited number of customers that require a large number of industrial products. All operations within the industrial market are complex, as they need substantial orders between the supplier and the customer. Industrial customers are very competent about the things they wish to purchase.

Some major industries dominate the industrial market. These industries are; mining, agriculture, fishing, construction, manufacturing, transportation, forestry, and communication. In addition, there are numerous public utilities such as insurance, finance, and banking services.

Specific and general B2B market segments

Each B2B vendor company (manufacturer, distributor, dealer, wholesaler..etc.) is classed according to the products (goods or services) it supplies and the markets it serves. These industrial companies are diversified according to their fields of activity.

While some B2B suppliers are industry-specific and offer remarkable examples of industrial products, others are large-scale companies that simultaneously serve many types of industrial segments. One of the most important aspects that make B2B markets so comprehensive is these marketing segmentation variables.

Importance of B2B market segmentation

Segmentation is perhaps one of the most often used methods in B2B marketing. It is based on the premise that grouping targets together based on shared qualities will help your business grow more effective and efficient manner. B2B Market segmentation strategies should be a fundamental component of every B2B organization's growth strategy.

Geographic
Demographic
Behavioural
Operational

What is B2B market segmentation?

The purpose of market segmentation is to divide a target B2B market into narrower, more specific segments. It categorizes existing and potential customers based on shared factors such as demographics, purchasing behaviour, needs, or geographic location.

When attempting to reach customers through a marketing message or advertisement campaign, it is critical to target the appropriate market with the relevant message. If you target too broadly, your marketing message may reach a few prospective customers. Still, it will also reach a large number of unqualified leads who are uninterested in your products (goods or services).

If your marketing approach is not optimized for your target B2B market, you will squander a significant amount of advertising expenditures.

Each customer has distinct requirements. As a result, a one-size-fits-all B2B marketing plan will fail to captivate qualified leads (prospective customers).

Instead, the B2B market segmentation process allows supplier companies to classify their customers into several subgroups to better serve their needs and market to them successfully. This provides B2B companies with a competitive advantage and increases their return on investment (ROI).

B2B market segments and target customers

Types of B2B market segmentation

B2B market segmentation is the method of identifying the most likely clients to make commercial purchases. It enables the segmentation of the entire B2B market structure into homogenous groups, enabling industrial companies to build more successful marketing and promotional strategies.

Industrial market types are primarily segmented by four factors, which are stated below:

4 bases of market segmentation

  1. Geographic segmentation
  2. Demographic segmentation
  3. Procurement behaviour
  4. Operational factors
determine your target audience with segmentation

1. Geographic market segmentation

Climate, region, and terrain are three significant characteristics contributing to the geographic factors used in B2B market segmentation.

Climate

The industrial market is classified according to this geographical feature into temperate, subtropical, and mountain zones.

District

Local, nationwide, regional, and worldwide are four geographic divisions used to segment the industrial market.

Zone

This factor categorizes markets as rural, sub-urban, completely urban, among others.

B2B market segmentation in industrial business sectors

2. Demographic market segmentation

The industrial market is classified according to demographic factors of business organizations’ type, size, and location.

Business types

Numerous business types operate in the industrial market. They include the mining, construction, insurance, finance industries, and agriculture, manufacturing, and government entities. Each of these companies and sectors requires a unique marketing mix.

As a result, the industrial B2B market segments are classified according to the sort of business capable of effectively meeting all demands.

Business size

The size of companies can play a significant role in segmenting the entire B2B markets.

Industrial clients are segmented into the following classifications according to their size. These are; very small customers, small customers (Small industries), medium customers (Medium size industries), giant customers (Huge industries), and very large customers (Government organizations).

procurement strategy of the customer affects industrial B2B market segmentation

3. Procurement behaviour

Regarding purchasing factors, industrial market segments are classified by procurement organizations, purchase behaviour, and negotiation duration.

Behavioral market segmentation

The nature and scale of an industrial organization affect its purchasing behaviour. In some companies, a single individual can make all purchases. In contrast, others delegate this authority to a purchasing department or committee. Selling to a single person is far easier than selling to a purchase committee.

As a result, using behavioural segmentation according to this criterion supports developing an efficient marketing mix.

Purchase process and methods

Each company has its own set of procurement behaviour. For example, many of them make purchases through contracts, while others make purchases through tenders. Similarly, the purchasing procedure differs for every B2B company.

Centralized and decentralized procurement are two distinct purchasing approaches used by businesses.

Negotiation duration

The negotiation duration is another critical component to consider when segmenting buyers based on purchasing characteristics. The negotiation phase gets excessively lengthy when many people are involved in the company’s purchasing decisions.

When a small number of individuals participate, the negotiation process will be shorter.

B2B market segments

4. Operational factors

Operational factors include various aspects such as technology, service requirements, and rate of use, which serve as the basis for B2B market segmentation.

Technology

The industrial B2B market can be segmented through technological specifications. While segmenting the industrial market, various technical elements must be addressed, including capital inducement technology, labour inducement technology, digital technology, and modern automation technology.

Customer service needs

Industrial customers need various sorts of services, which must be addressed when developing an effective industrial marketing mix. The primary segmentation criteria based on customer service needs are equipment installation, extended warranties, and equipment repair service, all of which are considered after-sale services

Rate of use

Each B2B customer makes unique use of industrial products. Their rate of usage determines the quantity and durability of these products. Therefore, when establishing an industrial marketing mix, all usage aspects should be considered. Among the primary variables are light users, medium users and heavy users.

Benefits of B2B market segmentation

1. Higher sales success rate

B2B market segmentation approach entails studying your target audience. More precisely, it assists marketers in segmenting a large market into smaller modules and educating them about the target market’s potential. Client’s hence lowering the risk of loss and increasing the likelihood of success for the organization.

So, start with preparing a list of types of business segments that you can focus on to increase your sales success.

B2B market segmentation model

2. Contributes to increased profitability

Using B2B market segmentation in marketing strategy is highly efficient for industrial companies. Segments enable them to target certain parts of the market and hence identify more profitable business opportunities within that segment. Thus, marketers can organize their campaigns (Ex: content marketing plan, lead generation strategies) according to the wants and requirements of the targeted B2B market segments.

B2B market segmentation strategy enables businesses to concentrate their efforts on a single segment rather than the entire market, resulting in an improved profit. This results in increasing the business’s profitability.

3. Boosts competitiveness

Once the marketers and business team clearly understand the focus and target industrial market, competitiveness can begin. As the company becomes more aware of its target market, the marketing team can develop fresh, unique concepts to help the brand stand out from the competition.

With the help of B2B market segmentation, offering prospective customers different benefits can assist the B2B marketing team attract more companies. Additionally, a deeper understanding of your customers will aid in establishing brand loyalty.

industrial sector analytics and analysis

4. Customer retention

Customer retention is critical for corporate success. Building effective strategies for B2B market segmentation aids in customer retention. Once a firm understands its customers, it can respond to their demands effectively. In addition, the customer’s experience with the market brand helps the customer connect with the product/service.

5. New market opportunities

Focusing on targeted industrial market segments helps in identifying and recognizing possible market opportunities. Customers that are dissatisfied with competing brands represent opportunity areas for the corporation to focus on and create their brand.

Companies can operate in these categories and offer customers a better product than what is presently available on the market, earning the client’s loyalty. As a result, B2B market segmentation creates tremendous market opportunities.

6. Marketing that works

Because the firm understands its customers and demands, the marketing team may tailor or personalize its campaigns and organize campaigns according to market demand. This is directly proportionate to the business’s performance.

industrial sales process

Conclusion for B2B market segmentation

It is critical to realize that if the target industrial market is not thoroughly researched in advance. Without an effective B2B market research, marketers can not focus exclusively on the targeted market. As a result, the marketing effect is diluted, and your company wastes time, money, and resources on a group of unprofitable customers.

There is not any pre-prepared list of industrial B2B markets for you to sell your products to. No one can provide you with an accurate list of industry categories to focus on. If they do, those lists will be all wrong. You should build your strategy and identify your target industrial B2B market segments on your own. Of course, you can get support from your company, but that’s all.

Working according to B2B market segmentation helps you establish a competitive and profitable market with a higher success rate and lower risk of loss. In addition, a complete understanding of the target market and its customers enables marketers to design, produce, arrange, and advertise products more efficiently and effectively and earn the trust of industrial customers.

How to success in B2B market segmentation