B2B Segmentation

Gareth Mitchell-Jones

B2B Segmentation Driving Loyalty Program Development

Hi Chris,

I find your topic interesting - firstly because loyalty engenders the need for some form of relationship with the consumer and secondly because you discuss understanding customer motivations within the B2B FMCG arena.

When building any segmentation I always offer the same advice if you can answer a set of key questions then its likely to be a worthwhile exercise spending some time at least thinking about it:

- Who do you want to target / understand?
- For what purpose?
- For how long?
- For which channel(s)?
- How long before you decide / need to change the segmentation?
- Most importantly, how will you use the information that your segmentation gives you?
- Will the segmentation be used operationally? In planning? In measurement? To categorize your business and its customers?
- Who will you educate your staff about the segmentation?
- How will you deploy the segmentation when it's built and keep it up to date for a) new customers, b) changing customers, c) churners?

Enough questions - hopefully you see the point that there are a lot of things that need to answered before embarking on the creation of yoru organsitaion's very own silver bullet.

Lets look at a few quandries:

i) In the B2B arena, who is the customer, is it the company (who pay the bills), is it an individual who places the order or is it the buyer (or worse still the buying panel) who decide on which suppliers to use? (User vs Chooser)

ii) If you can identify who your buyer is - are they always going to be the same?

iii) If they aren't the same will you provide offers that take account of the differing buyer's status and spending power or will you provide blanket offers to everyone who works for a given organistaion.

iv) Even if you could identify clearly your buyers; are they limited in their selection by an overriding set of business rules governing supplier selection, purchase pricing or product choices?

v) Businesses often buy in bulk and there is limited transaction data of the sort that has been seen in the B2C arena with, as an example, Tesco - to help drive understanding of buyer motivations - and this often tells you what, when and for how much (Recency Frequency Value) - but not why.

vi) Do you need to look beyond the customer and understand the supply chains that they are involved in or the channels they operate through. Will you be able to understand why a retailer stops selling your products - or for that matter a huge one?

vii) Motivations, even in the B2C world require quantitative and qualitative research data and reasonable sample sizes to draw out erroneous responses - is it possible to obtain the quality of data required to understand motivations? Possibly not statistically on emotional attributes from quantitative data - but possibly so on factual data and purchasing habits.

viii) Do you need a segmentation? Or do you need a way to classify your customers? Are they one in the same? Should they be?

The answer is NO by the way - you don't need a segmentation you need MORE than one.

You'll need to:

Understand breadth and depth of range / categories they buy from you - and how often.

Understand what other suppliers and competition you are up against (within retailers and regions).

Think about the type of retailer they are - and what is their potential to increase their spend / revenues with you.

Manage customers according to margins and understand true value - not revenue but value - and don't use averages - differentiate service based on this in conjunction with the above.

Mostly you'll need to work out where to get all of this info from and then worry about using it correctly.

I don't think that you need to build a loyalty programme - I think you need to develop a customer experience programme with defined customer journeys - understand them and differentiate the buying experience based on criteria that you set and define to move buyers up your 'loyalty ladder' - provide a relevant, consistent and valuable service - but please don't build a Loyalty Programme - you'll waste 'your' money.