If you’re one of the many business-to-business (B2B) companies that have recently added digital buying options to your selling strategy, you’re likely already seeing growth from this new channel. But brands often launch a digital storefront quickly with just a basic online offering. If you’re in this camp and overwhelmed with requests for more features, it can be hard to know where to start. Customer segmentation can help your digital commerce storefront drive growth faster by prioritizing what’s important to your buyers.
What is customer segmentation?
A customer segmentation divides customers into groups based on common characteristics, such as size, channel, or digital maturity. This makes it easier to prioritize customer demands and, in the case of digital commerce, select the most important online features that solve pain points for the target group (like improved search or a streamlined checkout process).
How customer segmentation helps drive growth
Understanding your customers’ unique attributes allows you to create more targeted experiences — through your website, marketing, pricing, customer service, and more. These tailored experiences encourage buyers to keep coming back to your site and make bigger orders more often.
Customer segmentation also helps you prioritize storefront features and how to use them, including:
- Storefront themes and personalization
- Promotions and coupons
- Pricing strategies
- Content strategies
- Products and service entitlements
Get started with customer segmentation
Several attributes can be used to group customers. Segmentation looks different for every organization and should be applied based on your business’ individual needs. Here are a few ways to look at segmentation:
Customer size or value
One of the first things to consider is a customer’s relative size, value, or both. Segmentation by size could be as simple as defining what is small, medium, or large. It may also be based on the organization’s scale or reach (local, state, national, or global), or the contractual makeup of the customer (for example, contract terms or cash on delivery).
For example, if you prioritize a national corporations segment, your next step might be to offer a range of exclusive products. Get this done by using account groups and price lists to offer customer-specific, exclusive products and entitlements to build loyalty. In contrast, if you prioritize a local independent segment, you’ll want to drive product awareness. Move forward by showcasing your product’s functionality to influence and upsell new products.
Customer segmentation by channel
Channel segmentation refers to the sales channel the customer typically uses, and this is generally industry specific. For example, the consumer packaged goods (CPG) industry might have classifications such as grocery, licensed, or independent stores. Manufacturing customers may be classified as industrial, agricultural, or residential.
For instance, if you’re targeting a restaurant segment, focus on building value as a supplier in a competitive channel. Or offer subscription-based replenishment orders for regularly ordered products. Alternatively, if you focus on a convenience store segment, try focusing on increasing order quantities. Use tiered pricing to offer value-based discounts to drive additional product quantities and spend.
Some customers may demand a variety of specialized storefronts and online ordering options, as this is their primary way to deal with suppliers. Other customers – generally smaller, independent businesses – may not yet be at the same level of digital literacy or maturity and might need more support in areas such as adoption, onboarding, and retention. As you think about your segmentation, consider how you’d offer different experiences for these different types of customers.
Order method customer segmentation is based on customer requirements, preferences for trading, or both. Some large organizations may trade via Electronic Data Interchange (EDI). Others may prefer dealing with field sales representatives face-to-face, or even outbound calls from a call center. Understanding how your customer orders can be a great way to determine the resources needed to personalize your storefront for specific customer segments.
Cost to serve
In B2B, it’s common that some customers have negotiated special pricing arrangements or more complex delivery/fulfillment requirements. Look for opportunities to segment your customers based on delivery terms or pricing. You might have an opportunity to introduce a promotional program or reduce the cost to serve by requiring specific segments to order online.
- If the cost to serve is low, ensure orders are captured every week. Use email marketing for order reminders, and ensure next delivery dates and order cut-offs are displayed on the storefront.
- If you’re targeting a medium cost to serve, protect this customer segment and drive additional spend. Use coupons to offer promotions and discounts to influence certain stretch purchase behavior. Advertise these coupons on your storefront.
- If you’re focused on the high cost to serve segment, maximize the order value and quantities so you get the most return on investment. Limit promotions, set minimum order quantities, and mandate online ordering.
Recency, frequency, and monetary (RFM) model
RFM customer segmentation applies directly to the customer’s ordering behavior. When was the last time the customer placed an order? How often does the customer generally order? What is the customer’s average spend per order? This could be used to apply gold, silver, or bronze classifications to customers to create VIP segments and target messaging or promotions that are relevant and timely.
This practice isn’t just theoretical. Before they got started with their storefront, GE Renewable Energy performed market research, interviewing customers and running online surveys to gather feedback. They wanted to understand customer pain points. They also wanted to use this data to segment the market and hone in on a minimum viable product (MVP) that would meet customer needs and help them grow sales.
“It took some time for us to define our strategy, but we wanted to understand what was really critical to our customers,” Marketing and Strategy Leader for GE Parts and Repairs and Universal Fleet Solutions Livia Miyabara said. “We deployed pretty fast because we’ve had a minimum viable product approach and divided it into different releases.”
Read more about how GE Renewable Energy launched their storefront in just 12 weeks.
Once you have a customer segmentation strategy that’s right for your business, it’s easier to prioritize your storefront updates and organize any feature requests.