There are three great experiences to be had from attending an in-person presentation by a B2B marketing expert. There’s the value of networking, of course. Then there’s the opportunity to learn something new. Best of all, there’s the chance to confirm that the practices I often advocate are also those endorsed and promoted by a recognized expert.
The expert in this case is Robert Hale, President of Robert Hale & Associates, a strategic marketing firm that bases all of its recommendations on fabulous, in-depth research for its clients.
It was in a meeting of the San Diego Software Industry Council that I heard Hale’s presentation “Market Strategies for Software Companies.”
The first part of his presentation was on what I know is the most important part of any B2B marketing campaign — targeting the right market. Hale begins his targeting strategy addressing segmentation.
BusinessDictionary.com defines “segmentation” as:
“Process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment. Few firms are big enough to supply the needs of an entire market; most must break down the total demand into segments and choose the one or few the firm is best equipped to handle. Four basic factors that affect market segmentation are:
(1) clear identification of the segment,
(2) measurability of its effective size,
(3) its accessibility through promotional efforts
(4) its appropriateness to the policies and resources of the firm.”
Hale expands this definition of segmentation somewhat. In addition to measurability and accessibility he adds sustainability and actionability. (I’m not sure actionability is a word, but we all get the point.)
For me to fully understand this definition of a worthwhile B2B market, I must translate this description into simpler descriptions.
A B2B market must be:
- Able to be clearly defined and described,
- Big enough to warrant B2B marketing efforts and costs,
- Reachable via some channel — direct mail, email, telemarketing, industry pubs, membership groups, trade shows,
- Qualified to buy the B2B product or service being sold.
Before the segmentation analysis begins, however, B2B marketers need to identify which companies should be targeted based on industry, title, company size, number of employees, etc.
Some companies just guess. Some say, “Well, we have a client in healthcare; we should pursue healthcare.” What Hale confirmed for me is that a company’s database has all the information needed to choose the markets a B2B company should target. He proposes a two-part analysis:
- Look at your customer base and segment it by revenue and profitability. 20% of the customers will float to the top as being the source for 70% to 80% of your revenue.
- Look at the customers you’ve lost. Determine why they were lost and what it is about the profile of these companies that makes them different from the customers who stay with you.
That’s all it takes to know who to target and who to avoid. It’s that simple.
This practice does not mean that there are no undiscovered opportunities to break into new markets or new industries. However, it’s the smart starting point for ensuring the success of B2B marketing efforts.