Examples of good vs. bad B2B account segmentation
Account segmentation serves as a practical framework to guide investment and management strategies in a B2B company. You need account segmentation if you have more than 10 clients; otherwise, while addressing them manually might be valuable, it is very difficult to scale in terms of marketing and processes. The goal of segmentation is to categorize clients into groups with shared attributes that are significant from a business perspective. These segments once clearly defined, and stable will be used to tailor specific actions such as customized marketing and sales initiatives.
I will present two examples of account segmentation and explain why the first one is relevant and the second one isn't.
Good output example: Consider the segmentation strategy for a training SaaS provider in the Food & Beverage sector. They divided their accounts into three segments: food chains with more than 10 locations, dark kitchens, and independent restaurants & small chains. These three groups share specific needs and can guide our marketing, operations and product development.
Segment A: Food chains with more than 10 restaurants. These clients face specific challenges due to their size, such as high staff turnover requiring consistent training across multiple locations and centralized decision-making at the headquarters level.
Impact on our strategy/operations:
Marketing POV: Tailored messaging to address their specific pain points (high turnover, process harmonization, etc.)
Product POV: As high revenue generators, investments in customizing our product for this market are justified, e.g., creating bespoke dashboards to consolidate data across the network
Segment B: Dark kitchens. These operations prioritize delivery efficiency and speed, operating without a physical dining space, which shifts the focus toward optimizing kitchen operations and compliance
Impact on our strategy/operations:
Marketing POV: Highlight the benefits of quick implementation and minimal operational disruption, appealing directly to their need for efficiency
Product POV: Offering streamlined training solutions integrated with technology for better order management and delivery logistics
Segment C: Independent restaurants and small food chains. These establishments typically have limited budgets and value uniqueness, needing scalable and flexible training solutions.
Impact on our strategy/operations:
Marketing POV: Promote modular, easy-to-integrate training sessions that support business growth and operational efficiency at a manageable cost
Product POV: Develop and offer personalized service packages that cater to the growth stages of small businesses, focusing on enhancing their local appeal and operational smoothness
Bad output example: Let’s consider a bad segmentation for a company renting out high-quality, specialized landscaping equipment, they decided to divide their accounts into three categories: large landscaping businesses, landscaping businesses using only organic materials, and urban-focused landscaping businesses.
However, this segmentation is not actionable and hard to use to monitor and improve our strategy and operations. Here’s why:
Segment A: Landscaping businesses grouped solely by operational size. This group is defined purely based on the scale of operations without considering other critical factors like customer type, service frequency, or geographic location
Marketing POV: There's little actionable information to develop tailored messaging or marketing strategies because the segment lacks depth in its definition. Without recognizing specific needs or challenges faced by these businesses, marketing efforts cannot be effectively targeted
Product POV: The lack of detail about specific service requirements or customer preferences means product offerings cannot be customized in a meaningful way. Investments in product adaptation would be speculative at best, with a high risk of misalignment with customer needs
Segment B: Landscaping businesses using only organic materials. While this might seem like a distinctive feature, it's insufficient by itself for effective segmentation if not combined with insights on customer demographics, location, or business scale
Marketing POV: The segment is too narrowly defined around a single attribute, which does not necessarily correlate with diverse marketing needs or preferences
Product POV: Developing specialized organic products or services might miss larger market opportunities where organic is just one of many considerations. There’s a potential to over-invest in a niche without adequate demand analysis
Segment C: Landscaping businesses in urban areas. The geographic location alone does not provide enough depth for meaningful segmentation unless paired with insights about urban environmental conditions, client demographics, or specific urban challenges
Marketing POV: Urban location is too broad and vague to dictate specific marketing strategies. It fails to address varied urban business environments and client needs that can vary significantly within different urban areas.
Product POV: Without a deeper understanding of the urban context—like space constraints or local regulations—product customization may not effectively meet the actual needs of these businesses.
An effective B2B account segmentation is more than just grouping companies by basic traits. It requires a deep understanding of market dynamics and specific company needs to guide strategic decisions. This focused approach helps allocate resources efficiently during the value creation plan.