What is B2B Market Segmentation? A Complete Guide

Determining how to engage customers and attract new ones can be daunting. It might feel like throwing spaghetti at the wall to see what marketing and sales strategies stick. And even then, it’s difficult to tell what worked well and what didn’t when sorting through mountains of data.

Well, hold onto your spaghetti because there’s a better way to launch campaigns and go-to-market (GTM) — and that’s through B2B market segmentation.

By segmenting your market into groups based on similar characteristics, you’ll be able to develop calculated and effective account-based marketing (ABM) campaigns.

In this guide, you’ll discover all you need to know about B2B market segmentation — including how to do it — so you can start strategically engaging prospects and closing deals faster.

What is B2B market segmentation?

B2B market segmentation is the practice of dividing your total addressable market (TAM) — i.e., all accounts that could find value in your solution if they started using it — into unique audience segments with shared characteristics.

The most common way to segment a TAM and create a target market of ideal accounts is by firmographics (company size, industry, and location). However, you can also separate by technology usage, intent, personas, and buyer journey stage, or a combination of these methods.

While the accounts in your target market will fit your ideal customer profile (ICP), that is, the set of qualities that make up your optimal company, the number of prospects is still too many to address in a meaningful way.

Narrowing your focus further into a target account list (TAL) and creating segments within it called “audiences” can help ensure you expend resources on qualified, in-market companies, leading to engaged accounts, opportunities, and, ultimately, customers.

Once you have your target account list (TAL), you can identify which accounts are the most relevant to pursue based on specific criteria like intent signals, and which ones to continue nurturing.

The importance of B2B segmentation

Segmenting your B2B market can be the difference between winning consistent new business and spending time and resources on companies that will never buy from you. Instead of hoping for the best, segmentation enables you to send precise marketing and sales communications to distinct audiences, accelerating account engagement and conversion.

On a short-term basis, you’ll notice improved email open rates, clicks, and time on site. But it’s the long-term where you’ll see the most value. Over time, segmentation enables you to get a clearer picture of your audience and their needs, helping you improve product development, differentiate your company, create brand loyalty, improve customer retention, and boost revenue.

B2B customer segmentation methods

At this point, you’re probably thinking, wow, this sounds like a fantastic concept — but what does market segmentation look like in real life? How does it work?

For B2B organizations, there are five methods for segmenting a TAM: firmographics, technographics, intent, personas, and journey stage. Some of your marketing and sales campaigns may use a combination of these approaches for optimal results; for others, just one may suffice. Which method(s) you use will come down to what you want to achieve from a campaign.

Here’s a closer look at the different ways to segment your TAM into a target market of accounts that fit your ICP:

1. Firmographic segmentation

Similar to how B2C companies use demographics to segment their consumers, B2Bs look closely at firmographics — the different descriptive attributes of businesses. Typical qualities include company size (headcount and annual revenue), industry, and geographic location. Firmographic data is often accessible and inexpensive, making it one of the most popular methods. It also remains pretty unchanging.

The disadvantage of firmographic segmentation on its own is the lack of detail. But, if you combine it with information on prospects’ current tech stacks or behavioral insights from intent data, you’ll be able to paint a more complete picture and better target your campaign.

2. Technographic segmentation

Technographics or technographic data refers to a company’s technology usage, including its current tech stack, use, implementation details, and adoption rates. This information helps you create an in-depth software and hardware profile of a prospect, revealing any gaps in their tools, what they may be willing to spend money on, their level of technical expertise, and what they might be looking to invest in.

3. Intent segmentation

Intent segmentation is one of the most effective ways to create a target market because it allows you to examine target accounts’ behavior. Using first- and third-party data, intent segmentation helps you see what prospects are researching your brand, topics relevant to your business, or competitors’ offerings.

For example, if your offerings include specific network solutions, intent segmentation identifies accounts consuming content online around relevant keywords to your business, like “security software” or “cybersecurity platforms.”

Building audiences around accounts that demonstrate purchase intent is a great way to narrow the field and focus on accounts representing your best opportunities.

4. Persona segmentation

Typically, multiple roles within a company provide inroads to a deal, and messages will resonate differently depending on the group.

For one campaign, you may want to segment your audience based on critical decision-makers rather than the end-users of your product or vice versa. Or, maybe your offering serves many different teams within an organization like Finance, HR, and IT, and you want to speak to a particular crowd for a campaign. Persona segmentation helps you do that.

5. Journey stage segmentation

Where potential or existing customers are in the buyer’s journey plays a massive role in the content they’re interested in and the sales tactics they respond to. When done correctly, segmenting by journey stage can help move accounts through the marketing funnel as they engage with content and converse with sales teams.

Perhaps you’re looking to target accounts who are familiar with your product and you want to nudge them with details on the benefits of your offering. Or, maybe you want to engage prospects who haven’t yet heard of your brand. Segmenting by stage can help ensure you meet your buyer where they’re at.

You might be familiar with the generic stages of the funnel — awareness, consideration, and decision — but there’s a little more nuance to consider:

• Qualified: The account fits your target account description, but they may not be entirely aware of your brand.
• Aware: The account is aware of your brand, but is not fully engaged yet.
• Engaged: The account is engaging with you and understands your products, but is not yet showing buying intent.
• Marketing Qualified Account (MQA): The account is finally showing signs of being in-market.
• Opportunity: The account is close to the finish line and you’ve engaged the entire buying committee at this point.
• Customer: You did it! The account is a customer, but the journey doesn’t end here.
• Post-sale: Identify upsell and cross-sell opportunities to present to the customer at the right time.

Keeping these stages in mind when segmenting will help ensure you offer relevant and powerful messaging, yielding desired results.

How to segment your B2B market

Now that you know the different B2B market segmentation methods, you’re ready to walk through the complete process of segmenting your market.

In general, it boils down to three steps:

1. Break your total addressable market (TAM) into a target market

Your TAM is the overall revenue opportunity for a product or service and includes all accounts that could find value in your solution if they started using it. Marketing to these companies is akin to the spaghetti-on-the-wall approach. To take productive steps toward growing and harnessing an engaged audience, you need to segment your TAM into a target market.

Creating a target market involves outlining your ICP’s characteristics. What industry are you targeting? How large or small of an organization is ideal? These qualities will be high-level and often firmographic, but they’ll help you get started.

2. Identify your target account list (TAL)

The list of accounts in your target market is usually still too large to work with. This is where building a TAL comes into play.

You probably already have a list of strategic accounts to which you want to sell. You can create your initial TAL using these accounts and add to it later to include a greater scope of companies representing your best opportunities.

Here are three ways to expand and refine your TAL:

• Further ideal customer profiling

Ask yourself, who’s your best customer? (It’s OK, we all have one, and no one else needs to know.) Now, wouldn’t it be nice to clone them? Getting picky about the customer characteristics your organization prefers can help remove any accounts that might not be the best fit.

• Predictive analytics tools

In the ABM world, these tools use your CRM data to identify the companies that are likely to be your best opportunities based on your current outcomes. If you want to automate finding companies that fit your ICP, these tools can help you do that — just ensure your CRM data is clean.

• Behavior-based targeting tools

Behavior-based targeting is another method for finding companies that fit your ICP to a T. It requires good quantitative data, but unlike predictive analytics, it doesn’t need to come from your CRM. These tools use the power of AI to identify and prioritize accounts that matter most by looking at behavior patterns that lead to an account becoming an opportunity.

Creating a TAL helps you implement an efficient ABM strategy, and you won’t waste time trying to reach companies that aren’t interested. You can even give your TAL a name (“Q2 Bull’s-Eye List” anyone?) to establish a common goal and help unify your sales and marketing teams.

3. Segment and prioritize your audiences

The final step to segmenting your B2B market is to take those target accounts from your TAL and divide them into audiences — groups of prospects or existing customers that fit well with particular marketing initiatives.

Enter those spectacular segmentation methods: firmographic, technographic, intent, persona, and journey stage.

Using one or a combination of these approaches, you’ll be able to focus on target account audiences, i.e., the companies worth pursuing.

For example, if your product is a project management tool and you want to promote it to ideal accounts, you might start by identifying critical firmographics. To whittle it down further, you decide to engage only with C-suite executives who work at companies in the qualified stage of the buyer journey, and have a low adoption rate of their current solution. Using this combination of methods, you’ll have gone from marketing to everyone with generic messaging to reaching more specific accounts with unique needs.

Once you’ve built your audiences, you can rank them from high to low priority and focus on creating personalized resources for them based on their priority level. Lower priority accounts might work well with one-to-many personalized ABM campaigns. For your highest priority accounts, you might opt to use one-to-few or one-to-one marketing methods, ensuring your messaging is highly relevant and impactful.

How B2B market segmentation differs from B2C

While customer segmentation for B2B and B2C companies differ in many ways, the primary contrast is that B2B buyers have more comprehensive and layered decision-making processes. B2B buyers often have multiple stakeholders and decision-makers weighing their options and considering your product, whereas, in a B2C scenario, there’s usually only one consumer to influence.

Additionally, the B2B buyer tends to purchase and consider more complex products and services with much larger price tags than B2C purchases. For these reasons, personal relationships nurtured by highly tailored campaigns are more critical for B2B buyers as stakes can be much higher.

Start segmenting your B2B market like a pro

You did it — you completed this guide and have the information you need to narrow down the seemingly insurmountable TAM into a target market, a TAL, and finally, actionable audiences. Now, it’s time to put your new knowledge to use.