By Andrew Dalglish - 21st June 2011
Last week I was invited to join The Network of Aspiring Woman, Birmingham Group. I was tempted. After all, “it’s where networking feels like a party”. However, I declined for two reasons. I live in London. I’m a man.
Clearly the Network’s execution fell short, but their strategy is smart. Rather than trying to be all things to all people, they’ve segmented the market and targeted a niche group.
Contrast this with another experience.
The call was from a data centre “specialising in the SME segment”. This struck me as the B2B equivalent of targeting a FMCG product at everybody under the age of 70. It’s far too broad and essentially meaningless.
SMEs, especially in relation to IT, are not one homogeneous mass. Some are luddites; others are at the cutting edge. Some have a dedicated IT function; others rely on third party expertise. Some view IT as mission critical; others could temporarily survive without.
There is no such thing as the SME segment. Rather, the data centre should have followed four principles to create a more valuable model: narrow, segment, profile then apply.
The four steps: Narrow, segment, profile, apply
“SME” is a useful starting point but only to narrow the focus. Having set this broad parameter, the next step is to identify meaningful sub-groups by contrasting customers:
Answering these questions reveals real segments. Groups containing individuals similar to each other on dimensions that can be used to create a more resonant proposition.
At this point, firmographic variables like company size and industry sector become relevant again as each segment can then be profiled on this basis to support targeting.
Finally, apply. Commercially attractive segments should be chosen as a focus. Offer, message and channel strategy should be tailored. Segments should be brought to life so those on the front line, especially sales teams, can easily grasp and apply them. Here, models are better replaced with engaging illustrations such as memorable segment labels, pen portraits and video vox pops.
That’s the theory, but how does it work in practice? Let me introduce Sage.
B2B segmentation in practice: A case study
Although its solutions are diverse, Sage is possibly best known for one thing – accounting software for SMEs. However, you don’t build a £1.4 billion, top 50 B2B Superbrand with such a simplistic approach to segmentation. Rather, Sage are a good example of the “narrow, segment, profile, apply” approach in action.
Sage, I suspect, began by recognising that the SME market is diverse and narrowed it down based on attitude and behaviour. They target not all SMEs but those pre-disposed to their solutions. SMEs meeting three criteria:
Having narrowed the parameters, Sage has then identified discrete segments based on several factors. For example:
The result? Deeper understanding of what makes the market tick, products that better meet requirements, messages that resonate and optimum use of resources as only genuine prospects are targeted.
I’d love to hear your segmentation stories. Please do share them in the comments box below.
Read more about our approach to business-to-business (B2B) market segmentation.
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Andrew has specialised in B2B research for over a decade and co-founded Circle Research in 2006. He is a columnist for B2B Marketing Magazine, a regular contributor to Research Live and frequent speaker at leading events such as the B2B Leaders Forum, Customer Experience Live and the Social Media World Forum. Andrew is a Chartered Member of the MRS, teaches the MRS B2B research course and holds an MA in Psychology from Aberdeen University alongside an MSc in Marketing from Strathclyde University.