Industry Insights

Unlocking Secrets to B2B Customer Segmentation

By Jeffrey Leggo / April 26, 2022

You may not know how to define terms like searchandising or customer segmentation, but you know what they are when you see them. Just think back to the last time you searched for a product or service on your favorite eCommerce website. Chances are the company used customer segmentation or, even more apparent, searchandising to suggest specific products for you to buy. You've probably seen familiar phrases such as, 'Customers interested in product X also bought Y,' or something like, 'Based on your interest in X, you might like Y.'

While searchandising is the process of curating search results in ways that drive sales and conversions, market segmentation is a broader strategy. Market segmentation involves dividing customers into groups based on common characteristics. By understanding each group's similar traits, habits, and behaviors, organizations can better target and connect with potential customers to build loyalty and drive sales.

Don't get burned applying B2C customer segmentation

Because most business applications are delivered using a subscription model, B2B sellers in this category need to have an ongoing and continuous relationship with customers. This means companies should lean into the uniqueness of customers for segmentation and when executing marketing campaigns. For example, searchandising practices—based on specific customer traits—may not be effective for selling business apps. That's because, in many cases, businesses will not be interested in particular products or SKUs you offer at any point. Suppose a company provides a vertical-specific expense management application for the hospitality industry. In that case, your healthcare customers won't be interested in those product types during their relationship with you. In short, your B2B customers have a lot to keep in mind when they buy, and there's a lot that makes them unique. Here are a few of their top considerations during their buying journey:

• Governance processes—Especially those driven by privacy or industry regulations are important considerations during the purchasing process and your customer may have multiple compliance or regulatory requirements by business unit.
• Geographies —During the sales process, B2B buyers routinely need to consider geographies. Regulatory and compliance issues vary by location, plus there are also considerations around the cultural norms, customs, habits, and the language of each area or region.
• Internal stakeholder requirements—One thing that makes the B2B sales process so complex is that multiple departments often have a lot of influence on what and how the purchasing team buys.
• On-boarding processes—When a company hires new employees, several new software purchases are generally triggered. Traditionally, this is primarily a manual process. It requires assigning and then provisioning application access based on the users’ role in the organization. That may include setting up business productivity applications, such as GSuite, or granting access to project management tools such as Monday.com.
• More than the sticker price—Unlike B2C customers, B2B customers are not impulse buyers. They usually have a complex decision-making process for new software purchases that requires an ongoing relationship. Their purchases also need to occur within the terms of a Master Service Agreement (MSA). These characteristics can make business buyers cost-sensitive, not just to the cost of a product but also to the cost of the labor, maintenance, and ongoing support associated with purchasing. For these reasons, it's not unusual for enterprise customers to involve a procurement team to streamline internal processes and negotiate prices with vendors.

Tips for segmenting B2B purchasers

Knowing your customers' top concerns when buying business applications, what metrics can you use to segment B2B purchasers? Although there are different options for categorizing business customers, some of the most common are revenue tier, number of employees, geographic location(s), and share of wallet by category or industry vertical.

You may also already have internal categories of customers based on what they buy from you, your commercial agreements, loyalty programs or other tiering concepts like bronze, silver, or gold customers. There’s no “one size fits all” strategy to segmentation in the B2B space. Instead, you should choose a method that fits best with what you’re selling and your customers. If you’re selling into companies of varying sizes or across multiple industries and geographies, you’re likely already following different segmentation strategies, even if you haven’t formalized them. Formalizing that strategy within your marketplace platform can give you the ability to offer those customers precisely what they're looking for while providing a premium digital commerce experience. Applying those customer segmentation filters within your online marketplace can help you refine your segmentation practices over time as your organization adds new SKUs, expands to new regions, and scales.

Where do you start?

Start by choosing a marketplace platform that helps set up and manage customer segments for you. Or buy or custom-build add-on solutions that fit your existing marketplace platform. Follow these best practices to sharpen your customer segmentation processes and deliver your customers an excellent procurement experience.

1. Find relevant products: Just as B2B customers aren’t impulse buyers, your different customer segments are probably eyeing very different selections from your product catalog. Enterprise customers, for example, don't need to browse tax solutions targeted at small businesses. So you can probably park a searchandising strategy in the short-term and customize your platform's catalog to only present appropriate SKUs to the right customer segments. These steps will ensure you create meaningful customer interactions and provide the best customer experience possible.
2. Customer Price books: Every customer knows (and feels!) they’re special. But, customer pricing and discounts can allow you to improve operational efficiencies. Your customers will be relieved at being able to reliably purchase SKUs online at their negotiated price. There are a few ways to achieve this: if your platform supports price books, you’re well on your way. However, the eCommerce engine behind your marketplace can probably also support separate SKUs at different price points, which can be presented to the right customer segments.
3. Commercial and legal agreements: Your legal and commercial teams are probably already using boiler-plate agreements for your different customer segments. When evaluating your commerce tools, ensure that your billing or marketplace platforms can leverage segmentation rules to reference the right agreements in the invoices you're sending to customers. Otherwise, you’ll be looking for manual solutions or workarounds.
4. Transactional emails and notifications: While it’s a given that your marketing team will leverage customer segmentation for targeted emails in their marketing campaigns, a robust marketplace platform will allow you to also send custom transactional emails and platform notifications. This functionality ensures that you present the right messages, links, and calls to action to the right customers. For example, that might include sending renewal notifications to the procurement manager and not to each individual software user.

Start now—Automate customer segmentation

While there may not be a customer segmentation shortcut, with an AppDirect marketplace, you can quickly formalize and apply customer segmentation strategies and refine them over time. Use our built-in segmentation features to unlock a premium user experience and achieve higher conversion rates! Want to go deeper? Read our Definitive Guide to Subscription Commerce to understand better how to maximize your subscription commerce strategy—from start to finish.