What Is Firmographic Segmentation (+8 Critical Variables!)
Here, we’re focusing on firmographic segmentation.
Firmographic segmentation is similar to customer segmentation but applied to organizations and businesses rather than individuals.
We’ll explain firmographics and how to apply it to your marketing strategy without doing lots of busy work and maximize your results.
What Are Firmographics?
Firmographics describe the various traits of an organization, company, or business (such as corporations, LLCs, partnerships, PLCs, for-profit and non-profit organizations, etc.).
Firmographic data is used to segment companies into categories by size, industry, revenue, etc., to improve their marketing and sales strategies and results with their potential clients and their patterns of digital engagement.
In short, it’s the opposite of customer demographics.
What Is Firmographic Segmentation?
Firmographic segmentation is the classification of B2B customers rather than B2C customers.
Classification of B2B segmentation is based on attributes such as:
- Industry type
- Company size (number of employees)
- Job titles
- Company structure
- Annual revenue
- Performance over time (growth rate)
Benefits of Firmographic Segmentation
The whole point of firmographic segmentation is to help organizations divide their B2B market into target groups for better marketing.
Here are some reasons it makes sense to implement B2B market segmentation.
Better allocation of resources
Every company thinks twice about its budgets these days, and firmographics is one method that ensures you make every buck count.
Once it’s done, you simply integrate the information into your organization’s marketing strategy and see an improvement in reaching your marketing goals.
It saves money, and the money you do spend goes much further.
It helps save time, too.
Initially, analyzing the information will take some time, but in the long run, you won’t waste money and time on dry leads.
You’ll have the confidence of knowing that your B2B marketing efforts are spent on well-researched, interested prospects.
Increased customer engagement
Obviously, a more targeted strategy will be far more effective at catching your customer’s attention and improving customer engagement.
Your organization will be better at those crucial initial customer interactions because you’ll have the data to personalize them.
Customers expect more today and are easily turned off without a personalized experience in their initial interactions.
They are also more likely to buy, return, and refer if it’s done right.
Cheers to customer loyalty!
Both of the above benefits naturally culminate in a better ROI, improving your sales and profits.
Saving resources means your team is scrambling less, and more efficient strategy implementation of firmographic segmentation makes it easier to make the most of every opportunity.
Retaining more customers creates the capacity to maximize opportunities instead of losing some in a bid for more warm leads.
Key Variables of Firmographic Segmentation
Segmenting customers by industry is one of the easiest and most popular ways because a company’s products or services automatically relegate them to at least one or two industries.
It makes sense to market to the needs of businesses that fit in a similar category, for instance, selling a customer management system to companies in hospitality.
Or selling a spa equipment maintenance package to various health and wellness spas.
It’s all about offering relevant resources to the right companies.
Location firmographics categorize organizations according to where they are, narrowing specific variables down from country, state, region, city, town, etc.
Especially to organizations that offer location-specific services, such as construction and maintenance.
The more locally and easily customers can get what they want from a business, the more likely they are to buy.
Other factors, such as climate, can also impact the importance of geographical segmentation for a business.
For instance, you wouldn't want to market ski equipment to a company located in Southern California.
Size segmentation focuses mainly on size according to revenue and/or number of employees.
Companies of different sizes have different needs.
For example, a small business of under ten employees will not be interested in the same high-level services and products that would make sense for a company of 100-300 employees.
When you assess your ideal customer profile according to size, it’s also useful to evaluate any data that could help you forecast their next growth moves.
The pace of growth can determine whether a potential customer will be interested in your offer in 3 months, 6 months, or a year from now, and you can plan your marketing effort accordingly.
The same also applies to the opposite end, such as a company that is downsizing.
4. Annual revenue
The revenue factor of size is also relevant because it determines the budget of your potential customer, i.e., whether they can afford what you’re selling.
It sounds ridiculously obvious, but selling an offer to an audience whose annual revenue doesn’t line up with your asking price can cost your customer segment.
Do the research and look further than just the annual total as well.
Evaluate any data that shows fluctuation in profits, a steady decline, or steady growth.
This will not only help you see what you can offer to which business but a better idea of the most relevant timing of your offer.
5. Legal status
The legal status of a company also impacts the services and products they are interested in.
For instance, consider the difference between marketing products and services to a non-profit organization compared to a limited liability corporation (LLC).
The most common types are:
- Individual firms
- Limited Liability Corporations (LLC)
- Public Limited Companies (PLC)
- Private companies
- Sole proprietorships
A company’s legal status will also impact revenue and size, as discussed above.
6. Company performance
Company performance in firmographic segmentation is all about achievements, profits and losses, fluctuations in revenue, employee growth, loss, and retention.
This is relevant because when a company struggles to stay afloat, it may retrench employees, tighten its budget, and shift its focus toward crisis management rather than buying something.
Conversely, a company that’s taking off has more budget capacity and will definitely want to spend on products and services that would make that growth sustainable.
Make use of research on these factors in your potential customers’ businesses and tailor your marketing accordingly.
7. Executive title
If you really want to narrow down your firmographic segmentation, categorizing your target market segment by executive title is useful.
It gives you a much higher chance of connecting with the person who has the decision-making and purchasing power to buy from you.
Similar to creating a buyer persona, it’s an extra layer of data that helps you market to the right prospects with the right offer at the right time, improving your results and revenue.
Compile a list of prospects by executive titles, such as:
- Chief Executing Officer (CEO)
- Chief Financial Officer (CFO)
- Marketing Director (MD)
- Managing Director (MD)
Add any title that refers to the head of a relevant department you aim to market to.
8. Sales cycle stage
Where a company is in the sales cycle will have a direct impact on its needs and what it’s currently looking for.
Think of it as needs-based market segmentation.
Similar to individual behavioral segmentation, consider whether your prospects are in the awareness stage, checking your brand out and comparing it with others.
Or are they in the consideration stage, figuring out whether your offer is a good fit for their needs and deciding to work with you?
Answering these questions will help you create ads and marketing content that speaks to each stage of the sales cycle where you have something relevant and valuable to offer them.
For instance, a customer in the decision stage would benefit from an incentive that allows them a low-risk limited trial of your product or service.
Every stage of the sales cycle is an opportunity for you to create a more precise connection with your prospect ― use it and nurture your leads!
Your next steps in firmographic segmentation
Now that this topic sounds much less like complicated jargon and more like an urgent must-do, you’re about to prepare for guaranteed improvements in your segmentation strategy.
Take it category by category, attribute by attribute, and highlight the most relevant intersections between your offer and your prospects’ needs, sales cycle stage, growth, location, industry, etc.
Enjoy the clarity of your segmentation analysis!