Many B2B marketers use firmographics to segment their prospects, but these take no account of SMEs’ individual characteristics. It’s time to take a different approach, says Earnest
The good news: according to Circle Research, 91% of B2B marketers segment their market.
The not-so-good news: 81% rely on firmographics. Not so good because firmographics are the business equivalent of demographics. They lump together small businesses by size, location and industry, for example, but are blind to businesses’ individual characteristics. Characteristics that set one small business apart from another.
Take your typical high street. That artisan coffee shop and the 99p store next door – they may both be retailers, operating from similar-sized, adjacent premises. But that’s where the similarities end. Their customer bases, operating costs, drivers and values are worlds apart.
So we wondered if there’s another way of slicing and dicing SMEs?
An alternative technique is psychographics-based segmentation, which takes into account buyers’ personal and emotional drivers. The human stuff.
We got in the research trenches with Imperial College London and looked at the effectiveness of two psychographics-based approaches.
The personal investment approach
We wanted to know: does the small business decision-maker’s personal investment in the company’s success influence their buying decisions? The study respondents were segmented according to their level of personal investment:
- Very Personally Invested (57% of respondents): Strong emotional investment and a high personal stake in the business.
- Fairly Invested (30%): Fair emotional investment.
- Less Invested (13%): Not particularly emotionally invested in the business.
No surprise that most small business decision-makers fell under into the very personally invested category, as they’re often the business owner. For these people, their business is their life. Which has significant implications when it comes to engaging with them.
They’re almost twice as likely to want their suppliers to share similar business values – they’re looking for partners, not just suppliers. And they want a personal connection – they’re four times as likely to value highly the ‘friendliness and personable nature of sales representatives’.
The SUE approach
This model diagnoses the unique factors that drive each purchase – and predicts how rationality levels might rise or fall with each decision:
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Significance:
What could a purchase mean to the customer’s business? -
Urgency:
How time-critical is their purchasing need? -
Ease:
How simple is it to research and buy the product?
So, purchases with a higher SUE score, like switching accountancy partner, or buying a new phone system, lead to a more calculated, analytical decision-making process. While purchases with a lower SUE score, things like buying office supplies, lead to more emotional decisions. Once you’ve worked out whether your proposition will register a higher or lower SUE score, you can fine-tune your approach.
For a more scientific purchase process, you need to:
- De-risk it with trials and demos.
- Lighten the research load with helpful content and tools.
- Support prospects online, over the phone and in person.
And for less critical investments, you need to:
- Get creative with your communications – it’s okay to entertain!
- Make personal connections with buyers at every touchpoint.
- Be the easiest to buy from.
Some of that might sound obvious. But it’s amazing how often we cruise right past common sense – and how handy it can be to have a smarter model for thinking small.
60-second SME segmentation guide
Understand business needs
: Do some qualitative research – focus groups, one-to-one interviews – to pinpoint the issues faced by a cross-section of businesses in your market. You’ll get a clearer picture of their different needs, preferences, attitudes and behaviours.
Quantify these needs:
Do some quantitative research to find out how many companies have these needs and how much of a priority they are.
Identify potential target segments:
Conduct a cluster analysis looking at groups that share common characteristics.
Decide which segments to focus on:
Carry out a market segment assessment based on the size and value of the segment, market share analysis, competitive landscape and market addressability (whether you can identify and target the segment easily).
Build target customer personas for each segment:
Use everything you’ve learnt to build 3D profiles of each target that can inform your communications strategy.
Think Small: How to market to small businesses
In this marketing success pack, B2B Marketing and Earnest offer advice, opinion and first-hand experiences of targeting and engaging small businesses owners.
