Developing customer profiles and segmentation strategies is essential to delivering personalized and relevant products and services. But too often in the B2B space, segmentation stops at the demographic level (size, industry, geography) and doesn’t include buyer’s behaviors and actions. For companies facing stagnate sales growth, building deeper and broader customers profiles that include a behavioral component may reveal the keys to greater growth and profitability. B2C companies have led the way on profiling, segmentation, and understanding buyer behaviors. It’s time for B2B firms to catch up.
Buyers as Rational Actors
In the consumer B2C space you will likely find irrational, impulse-purchasing customer decisions driven by emotion. Conversely, business buying decisions in the B2B world are driven by careful, measured, cool-headed analysis, devoid of any emotion. Or so we think. When comparing the two segments, you find one unifying element: humans are involved. And in either the consumer or business context, buyers rarely act as rationally as one would assume. There is plenty of research to back up this notion of irrational human behavior when it comes to evaluating risk, loss, probabilities and other “cognitive biases” associated with decision making.
The most notable work in this field is the Nobel Prize winning research of Kahneman and Tversky, who through decades of research showed there were two competing decision processes that humans engage in: one is fast, intuitive, and emotional; the other is slower, more deliberative, and more logical. What they discovered is that when faced with decisions involving high degrees of uncertainty or potential risk, even smart and experienced people can fall prey to biases that lead to bad outcomes.
To develop more meaningful customer profiles, you need to understand how certain types of decision-making biases may be influencing your buyer’s behavior. You need to know how these customer decision biases might influence how and when you offer price discounts, rebates, service contracts, extended warranties and add-on services.
“Loss aversion” is one of the decision-making biases uncovered in their research, and understanding how it influences customer decisions may help you structure your offerings in ways that could improve conversions. From Kahnemen:
“For most people, the fear of losing $100 is more intense than the hope of gaining $150. We concluded from many such observations that losses loom larger than gains and that people are loss averse.”
How does loss aversion play out in everyday life? Homeowners are less likely to sell their home when prices are falling, or investors are less inclined to dump stocks when the market is dropping. Either action would cause them to recognize the loss, and thus mentally process it. You also find this phenomenon in sports, with professional golfers making a higher percentage par putts (risk of losing a shot) than birdies of equal distance.
Recognizing that behavioral biases impact decisions, you need to ask yourself: Is the way you position and price your products and services mindful of these potential biases? Are you presenting the “upside” of your offering when the customer is really concerned about downside risk or loss? Do all your buyers think and behave the same way? Deeper customer profiles and segmentation that incorporates prior actions and behaviors can help you begin to answer these questions. So what are the core elements of your new, comprehensive customer profile?
Elements of a Customer Profile
To develop a more compressive B2B customer profile, we can borrow somewhat from the B2C world. In the consumer space, there are six key areas that matter to marketers:
1. demographic (age, gender, income)
2. geographic (where they live/roam)
3. attention (what they concentrate on)
4. consumption (what they buy)
5. behavioral (what matters to them)
6. intentional (what they’re about to do)
Taking these in order, you will likely have acceptable quality and depth of demographic and geographic. You may also have a basic idea as to “attention” if you are tracking any basic online activity, for example.
Where things get interesting is when you overlay consumption and behavioral data based on prior purchase history. With this data in hand, you have a distinct pattern of purchasing behavior that can lead you to the ultimate end game: intentions. You want to know what buyers are likely to do next—what, when and how much will they purchase—and to be ready with the right combination of offerings when that moment arrives.
The process of developing and using customer profiles is at its core a process of testing assumptions: you structure pricing and offerings targeting a specific segment, and expect certain outcomes. This process begins with understanding the quirks of the human mind (buyer decision making), the depth and breadth of the data about the customer (the profile), the combination of products, prices and promotions you test, the results you see, and the adjustments you make based on those results. This requires digging a bit deeper on your profiles, adding consumption and behavioral data to help you find new opportunities for growth.