Firmographics: how to use them for your strategy

For marketers, segmentation is a very important concept.

Segmenting your target market is an essential activity that can influence your entire business plan.

Once a niche has been selected, management will need to define which distribution channels are appropriate to serve it, what procurement strategies to adopt, what turnover targets to set and more.

Types of segmentation differ considerably. One of the best known is demographic segmentation, used in the B2C environment to group consumers into homogeneous groups based on their characteristics.

They may concern:

• People’s income.
• Their level of education.
• Age.
• Gender.
• The place of residence.

The same approach is applicable in the B2B sphere: this is where we talk about firmographics. The concept is extremely important, but often companies do not take it into account.

Let’s find out why it is essential by first understanding what is meant by this term.

Firmographic segmentation: a definition

The expression comes from the word firm. Within a B2B strategy, firmographic segmentation represents the division of companies (or other organisations) into groups with similar features.

These attributes (firmographics) are numerous. Here are the most used ones:

• The geographical location of the organisation: continent, country, region, city but also industrial districts are the important elements here.
• Its size, which can be understood both in economic terms and in terms of employees.
• The sector it belongs to, usually identified through industry codes, and therefore the products/services it offers.
• The stage of the company’s life cycle (is it a mature business? Or is it in decline?).
• The professional title of the decision makers in the organisation (CEO, Purchasing Manager, Marketing Manager, etc.).
• The legal status, used for example to distinguish between parent company and subsidiaries.

As can be seen, these variables overlap with the demographic variables used in B2C. In other words, they communicate the characteristics of organisations and the role of people within them.

Let’s clarify with an example.

A company specialising in industrial machinery is looking to expand into Germany with its monolithic glass cutting tables for small to medium-sized plants.

Identifying the customer segment in line with its offer is the first step in the subsequent marketing and sales strategies.

For this purpose, it is necessary to identify the medium-sized German companies producing monolithic glass (a type of single pane glass), and then the people within them who deal with purchasing or production management.

In addition, it might be useful to know the turnover figures of the company and their evolution over time, to understand whether it is a growing company or not.

Studying the market and these elements has many benefits for B2B companies. Let’s find out which ones.

Identifying the target market using firmographics: the advantages

Firmographic segmentation allows better management of the resources available to our company.

It makes it possible to:

• Reduce the time and cost of selecting the market to be targeted by focusing on relevant companies.
• Optimise customer service through strategies dedicated to specific segments.
• Efficiently allocate budgets to immediately plan activities consistent with the chosen target.
• Increase the return on investment by selecting segments that are in line with our offer.

What are the areas of application of this approach?

Contrary to what you might think, firmographic segmentation is not only useful for identifying potential customers but can also be used in other cases.

Firmographics: areas of application

Once the appropriate target market has been defined, the company could also use firmographics to identify competitors.

Competition analysis is an essential activity when it comes to selecting a market to attack.

Returning to the example of the glass machine company, it is useful to know how many competitors are already present in Germany, which product lines they offer and what their turnover is.

In this way, the company can develop new strategies to cope with the presence of competitors.

Similar considerations apply to the search for suppliers: using firmographic segmentation can be very useful to find companies that offer suitable components for our machines (e.g., particular types of pressure sensors).

How to segment the B2B market

After clarifying the benefits and areas of application of firmographic segmentation, let’s see how it can be used by B2B marketers.

There are two ways:

• Through traditional solutions such as participation in trade fairs, events, conferences and other meeting opportunities for professionals.
• Through digital tools to analyse organisations, grouping them according to the same characteristics and integrating this data into business operations.

Let’s see the differences between the two approaches.

Managers in our company might be tied to more traditional ways of working and choose to find new customers at a trade fair abroad.

After travelling and setting up its own stand, the company will wait to meet with representatives of other businesses – for example companies active in the processing of glass for the building industry – to propose its products.

Once the business cards have been exchanged and the trade fair is over, the account managers will contact the people they met, perhaps after searching online for more information about their companies.

This process usually takes months and is costly, and there is not always a guarantee that the right people will be found at the event.

Digital tools have the advantage of reducing the time and costs of this process.

Firmographic segmentation and digital technologies: a match made in heaven

To segment companies and other organisations, the first tool used in the digital environment is business information databases.

Within them, companies are classified according to the industries they belong to (e.g. agri-food, machinery, etc.) or according to quantitative parameters such as turnover and number of employees.

Usually, these databases must be consulted manually to know the peculiarities of the companies within them.

Today, however, there are solutions that automate this process, analysing the online presence of companies using AI to understand what activities are carried out, the products offered and much more.

The combination of these two factors – databases and AI algorithms – is a winning combination. What are its strengths?

• Reduced work time: by automating the analysis of web sources, these tools enable an overview of the target market to be obtained in just a few minutes.
• High precision: thanks to AI, it is possible to identify companies with specific characteristics, developing a detailed segmentation.
• Completeness: the international coverage of the databases allows you to gain in-depth knowledge of new markets.
• Affordable costs: the automation of digital technologies reduces the costs of trade fairs and business trips.
• Possibility of customisation: by allowing users to freely set the parameters for the search (e.g., company size or location), the solutions developed by Matchplat allow users to segment the target market in an intuitive way.

Conclusions

We have found out what is meant by firmographic segmentation, and how this concept overlaps with demographic segmentation used in B2C.

Having seen the benefits (optimisation of budgets, increased return on investment, etc.) we looked at the areas of application of this activity.

In addition to potential customers, it also identifies competitors, suppliers, joint venture partners and much more.

Next, we compared the methods with which to carry out a firmographic segmentation.

We have seen that a traditional approach based on live events is important to keep in touch with the market, but nowadays it is not enough.

The segmentation strategies used in B2B must include digital solutions that stand out for their speed and accessibility.