Every great brand needs market segmentation. I mean, who doesn’t want to get to know their audience better? To optimise user experiences (UX), personalise products and improve business focus? All of which, in turn, offer enviable advancements such as a greater return on investment. Nice.
But let’s be clear, in order to fully comprehend which segmentation type(s) are best for you and your audience, you must first get to grips with all of them.
The four main types of market segmentation are demographic, psychographic, geographic and behavioural. Each of these segmentation methods offers its own unique and constructive actionable insights. But there’s one type of segmentation that always seems to slip our minds: Firmographic segmentation.
Hold up, what exactly do we mean by a ‘firm’?
‘Firm’ is a term used to describe business organisations such as corporations, limited liability companies (LLC), public liability companies (PLC) and partnerships. When we use ‘firm’, we are typically referring to for-profit organisations. Firmographic segmentation, however, also takes into account non-profit organisations and government entities.
What is firmographic segmentation?
Firmographic segmentation is the process of analysing B2B audiences and grouping them based on their shared characteristics. Paralleling the other primary forms of segmentation, firmographic data is gathered and analysed in order to better understand the target audience in terms of their needs, wants and what they might offer in return.
Essentially, B2B companies use firmographics for organisations in the same way that B2C companies use demographics for people.
Whilst there are countless variables that B2B businesses can use, there are typically 7 predominant factors of firmographic segmentation:
- Company Size
- Executive Title
- Sales Cycles Stage
Let’s dive a little deeper into each aspect of firmographic segmentation...
In firmographics, an ‘Industry’ label is based on the primary activities of an organisation, such as the products they create or the services they offer. Industry is a key player in the world of firmographic segmentation; targeting, or failing to target the right industry has the power to skyrocket your segmentation efforts, or bury them. For example, an organisation that revolves around agriculture or the environment is highly unlikely to need or want the same resources as a high-store fashion retailer. Therefore targeting based on industry allows you to offer different resources to each organisation.
Did you know that 85% of B2B marketing leaders fail to connect their content to business value? One of the key reasons for this disconnect is that the content they produce “lacks forward-leaning insights that buyers can turn into action”. It’s undeniable that the way you choose to market to these contrasting organisations could make or break your brand.
Where does this organisation sit geographically? As with the common geographic segmentation methods that we know and love, in firmographics, the location of an organisation takes into account factors such as city, country, continent, climate, culture, etc.
The location of a firm will always affect a consumer’s likelihood to buy and will also affect a brand’s ability and motivation to sell and distribute. Analysing the geographic characteristics of a business’s location can help B2B marketers measure the areas that will likely be fruitful for them and where their brand, product or service can bring value to consumers in return.
3. Company Size
In firmographics, company size is defined by two things: annual revenue and number of employees.
- Annual Revenue
Money is always a contentious subject but, when it comes to segmentation, revenue is a key factor. Why? Because what you’re offering has to be affordable to your current and prospective consumers - Your product is too expensive? No sale. You’ve placed a huge ad spend on the wrong segment? No return on investment.
Research is essential. You need to ask yourself questions such as: Is your target market within the Fortune 500 or are they a small start-up? Has their revenue fluctuated over the years or are they steady earners? These are the kinds of questions that will guide your data collection and ensure that your firmographic segmentation outcomes are reliable and therefore actionable.
- Number of Employees
There is no official set of criteria that establishes whether a business is large or small. However, according to the U.S Small Business Administration, companies that employ 1,500 people or less can be counted as a small business.
The number of employees an organisation has is a good indicator of its current position, i.e. are they a small, local business or a multinational? This information will impact your promotional tactics; the needs of a local newsagent will generally be different from that of a global conglomerate. Therefore, your brand’s targeting strategies will also be different - are you targeting a brand that’s in multiple countries? What is their purchasing power and distribution abilities? Are they likely to be long-term returning customers or will a one-off purchase suffice?
Status can refer to the relation of one business to another but most often refers to an organisation’s legal status. This means that the organisation is operating as:
- An Individual firm
- A Limited Liability Corporation (LLC)
- A Public Limited Company (PLC)
- A Partnership
- A Privately held company
- A Sole proprietorship
Understanding which of these organisations is most likely to benefit from your offerings will give direction to your sales, advertising, and marketing strategies which will, in turn, bring you the best yield for your efforts.
The performance aspect of firmographic segmentation refers to how an organisation has behaved, and what they have accomplished, over time. It takes into account factors such as:
- Employee growth
- Profits and/or losses
- Increase or decrease in revenue
Performance is a key aspect of firmographic segmentation; you may group organisations based on their size or industry but if they are experiencing a slump in revenue or have ceased to onboard employees then they may be looking for solutions to problems rather than new, shiny, expensive products. The requirements of a business experiencing a slump compared to one whose profits and employment rates are rapidly increasing will vary greatly.
Segmenting based on performance over time is an effective way to understand the current position of an organisation and predict their future behaviour, therefore helping you to tailor your marketing and sales efforts as much as possible.
6. Executive title
Whilst ‘executive title’ refers to a person, or people, rather than a business itself, it’s a key component of your firmographic segmentation. Why? Knowing the executive titles of your target audience(s) means that you can identify the main influencers or decision-makers in the company that you’re focusing on.
Is it the CEO? The CFO? Marketing Director? Knowing who might be a dependable buyer will ensure that you don’t waste your time and money on targeting the wrong decision-maker, and also allows you to further personalise targeted content or emails.
7. Sales cycle stage
The position where a person or business sits within the sales cycle always impacts the information that you provide for them. Are they in the awareness stage i.e. are they just getting to know your brand and exploring other possibilities? Are they in the consideration stage where they’re contemplating your brand as a viable option for them? Are they in the decision stage where they have concluded that your brand has everything they need and have chosen you over your competitors?
Take a look at the ad below:
This ad is targeting those at the consideration stage of the sales cycle. There is little explanatory text as the ad is not for awareness-stage viewers. Those in the consideration stage of the sales cycle have already read about Hurree - The Segmentation Company. They know what we do, and this ad is offering viewers a chance to book a demo - before deciding whether or not Hurree's segmentation platform is right for them.
Understanding where the consumer sits in your sales cycle helps with your lead nurture process by offering insight into the requirements of these current or prospective customers, which enables you to push them through to the next stage.
Market segmentation plays a great role in the personalisation of products, services and marketing practices today. For example, did you know that recipients are 75% more likely to click on emails from segmented campaigns than non-segmented campaigns?
While firmographic segmentation may be less familiar than our famous 4 market segmentation types it’s just as important, particularly in the eyes of B2B brands. The only downside? Much like demographic segmentation, firmographic segmentation is one of the more basic segmentation types. This, however, still does not diminish the power that firmographic segmentation has in positively affecting customer satisfaction and brand performance alike.
Key benefits of firmographic segmentation:
- Increase in sales and ROI
- Identifying new opportunities
- Improving promotional tactics
- Understanding current and prospective consumers
Many B2B brands struggle, or don’t bother to dive deeper into the needs and wants of their consumers. Firmographic segmentation is simple and allows marketers to comprehend, and draw an accurate picture of current and prospective consumers. This greater understanding then helps to group organisations and tailor products, services, and content to consumers, as well as uncovering a huge range of valuable, informative insights along the way.
Level-up and become a master of Market Segmentation with your very own FREE guide: The S.M.A.R.T Guide to Market Segmentation 💌 Don't hesitate to get in touch with me directly via firstname.lastname@example.org with any of your questions or comments you may have!