Incorporating direct customers' customer needs in a multi-dimensional B2B market segmentation approach

Abstract

Business-to-business (B2B) marketers typically segment their direct customers on two segmentation bases: direct customers' expressed needs and evident behaviors. However, direct customers' demand for business marketers' offerings is often ‘derived demand’, i.e., heavily influenced by the needs of their own downstream customers. Consequently, scholars suggest that marketers may benefit from incorporating these customers' customer needs as a third segmentation base, distinct from but possibly interrelated to the two bases of direct customers' needs and behaviors. However, extant joint segmentation models are limited to two-bases. Focusing on the addition of a third customers' customer needs basis, a new B2B joint segmentation model is proposed, allowing for three interrelated segmentation bases. The model is first validated in Monte Carlo simulation studies and then applied to segmenting the business customers (advertisers) of a US newspaper publisher seeking to enable more precisely targeted selling effort allocation and communications strategies. The model uncovered joint segments of business customers based on their behaviors, needs, and downstream customers' needs. Results demonstrate the advantage of the model that yields actionable segments of customers with similar downstream customer needs. Finally, model relevance and feasibility in contemporary B2B markets is confirmed in a qualitative study with experts in various industries.