How to segment a B2B database to gain the most value from the records within is a moot point. Typically, it is done using firmographic (that is, B2B demographic) information, which includes companies' industry type, SIC code, turnover and number of employees.
The result, however, is a fairly basic level of segmentation. For the direct marketer who wants to go deeper, there are a couple of choices: segment the database on a geo-demographic basis whereby companies are separated based on location; or segment it based on the attitudes of company owners. But which more realistically describes business decision-making behaviour?
There are a number of B2B classification systems on the market, including Experian's Commercial Mosaic, which classifies UK businesses into 13 groups and 50 types by merging geo-demographic and attitudinal data. Others include the GIC and PIC systems from B2B data services specialist Information Arts: GIC (Geo-demographic Industrial Classification) is a modelling tool based on the business characteristics affected by location; PIC (Psycho-demographic Industrial Classification) classifies small-business owners according to attitude.
Meanwhile, Blue Sheep - which owns the UK Business Universe, an aggregated database of 5.3 million records - offers business data files that contain elements of geo-demographic and attitudinal data, as well as the standard firmographic data. Many data specialists also provide solutions tailored to client requirements. With less available data than exists in B2C, a lot of B2B data is repackaged from the same sources, including Companies House, Thomson and Yell.
Advantages and pitfalls
Despite many segmentation tools merging geo-demographic and attitudinal data, both elements have their aficionados and detractors. While attitudinal information can be valuable, the consensus is that segmentation systems based on attitude only work with small businesses where one person is largely in control of decision making.
"The issue is 'addressability' of audience," says Richard Payne-Gill, marketing director at LBM, which creates bespoke segmentation models based on firmographic data. "Attitude can classify consumers into different types based on lifestyle, demographics and maybe transactional information, but within a company there is no guarantee people will behave in a certain way. They are constrained by the values of the company they work for, and buying decisions are more complex."
Another issue is how quickly people change jobs. "The biggest flaw of attitudinal segmentation is that employee turnover can be very high. Any results derived from primary research are only valid at the time the research was conducted. This means research needs to be continually conducted," says Kirsty McKinney, brand manager at Market Location.
There is also a question mark over the point at which a business becomes too big for attitudinal segmentation to be effective. Payne-Gill argues that it only works at SoHo level, while Stephen Barr, head of product development at Information Arts, believes the size of a company's management team is more relevant than its overall number of employees. "The point at which attitudinal segmentation stops working depends," he says. "You could have a 200-seat call centre run by a small team; it would look like a bigger business if the personality of the owner wasn't all over it."
Meanwhile, marketers need to be aware that seemingly similar companies may act according to where they are based. It is wrong to assume that every business along a high street or on an industrial estate will respond in the same way to marketing communications. "Two retailers may look like very similar businesses on paper, but one could be in Albert Square and the other in Bond Street, so their business buying processes might be completely different," says Sue Walters, business analysis manager at Experian.
Where geo-demographic systems are particularly useful is with territory planning, or if a company has teams based in different locations across the country. However, unlike attitudinal systems, geo-demographic tools are not predictive, and predicting customer behaviour is something all marketers want to be able to do.
Difference and synergy
It should also be noted that the data used in geo-demographic systems is different to that used in attitudinal tools. Geo-demographic systems largely rework existing data from sources such as Companies House and Marketscan's Directors at Home file, which includes personal information about company directors, such as age and lifestyle indicators, and corporate information including SIC code and number of staff.
On the attitudinal side, the lack of available data for B2B purposes means companies must create a dataset from their existing files and apply it to additional data, such as Directors at Home. "It is always a blending exercise with attitudinal segmentation," says Barr. "You are effectively creating your own data."
Although attitudinal and geo-demographic data are quite different, they work well together, and the ideal approach is to merge firmographic, geo-demographic and attitudinal information. "I would always start with firmographics to identify where I can get the most spend. In B2B these are great variables. Once you know this, you can apply attitudinal data and get more bang for your buck," says Payne-Gill.
Perhaps the best way of doing this is to go down the bespoke segmentation route, an increasingly common approach. "If marketers want greater depth then specific tele-research to create a bespoke dataset would be the most effective method," says McKinney.
Market Location recently worked with a client to find companies that use fuel cards. In addition, it found out their usage, renewal dates and the opinions of the companies' decision-makers. From this it was able to segment businesses according to need as well as demographics, creating a database specifically tailored for the client.
Opinion is split on which is the better technique. But John Wright, commercial director at Blue Sheep, says: "It is always better to do something than nothing. The main point is that those who conduct analysis, whether it is attitudinal or geo-demographic, get a better response than those who don't."
CLIENT VIEW - WHAT WORKS
- Anthony Hyde, marketing communications manager, Xerox
"Geo-demographics for B2B generally doesn't work the way it does in the consumer market unless there's a good reason for similar organisations to cluster in certain areas. So we prefer attitudinal data.
"There are some exceptions, however: in Holland, production printing is big, so we do market sometimes on that basis. We try and analyse by using profiling: we consider what a good customer looks like, and then go and find more people like that."
- Simon O'Mahony, head of marketing, Screwfix
"Predictability and impact on sales are the bottom line: we want payback in cost savings or revenue. I'm not sure whether the attitudinal stuff in our market is as relevant as the geo-demographic tools.
"We use geo-demographic tools on a number of different levels such as to co-ordinate national and local activity and to focus on other specific activity. I don't know if the link has been made between attitudinal segmentation and improvements in sales."
B2B MARKET - ROOM FOR MORE?
B2B data entrant InfoUK launched last December and boasts a database of 2.2 million records. Part of the InfoUSA Group, its aim is to build up a wholly owned, comprehensive B2B database aimed at SMEs, list brokers and agencies.
"Our main differentiator is that the data will be our own," says Richard Lloyd, InfoUK general manager. "No one else will have rights over it."
Info UK recently showcased at the IDMF, but with well-established companies such as Experian, LBM and Conduit all reselling or providing their own B2B data, is there room for another supplier?
Opinion is divided on this one. Gary Brown, product and marketing director at Thomson Directories is unconvinced the new database will be significantly different to that of Thomson or any other player. However, he does concede space exists for a new player to tap into the SME market.
"In the retail sense, there are a lot of SMEs that do not take advantage of B2B data, although on the wholesale market side, there are plenty of suppliers," he says.
PROFILING EXPERIMENT - WHO DO THEY THINK YOU ARE?
Information Arts' PIC is an attitudinal classification system which segments small business owners into 'passionate', 'expert', and 'money maker'.
We tested the system with Hilary Andrews, founder and joint MD of online male grooming company Mankind, which has 23 employees. Andrews previously owned a beauty clinic, ran a mail-order cosmetics business, and lectured in beauty and holistic therapies.
Information Arts sent her a questionnaire, which along with general demographic and firmographic questions, asked multiple-choice attitudinal questions with answers scored according to accuracy. They included: "I know this industry extremely well - better than anyone else", and "Making money is the most important thing for this business to do." Information Arts then used PIC to create Andrews' profile.
The classifications
Passionate: Idealistic and in business for the love of it. Number-crunching, trivia and detail are no-nos. Most likely to switch mobile phone supplier because of the importance of communication, and switch bank account because of a desire for human contact. They are least likely to switch utility suppliers, a subject too boring to waste time on.
Expert: Analytical, experienced, and motivated by knowledge. Hard working, cautious and rational, they gravitate to products and suppliers they know, and brands they recognise and trust. Their eye for detail means they are most likely to switch energy supplier, and least likely to be rushed into purchases.
Money maker: Overconfident, and impulsive, profit is the priority. However, the focus on the bigger picture of profit and exit strategies tends to mean smaller operational overheads become distracting background issues. They are most likely to make impulsive business decisions, and least likely to scrutinise day-to-day costs.
The results
"Hilary is a 'passionate'," says Stephen Barr, head of product development at Information Arts. "She is driven by an emotional connection to the business, rather than money or a desire to show she is the best.
"If you asked Hilary why she does her job, the answer will be 'for the fun', possibly with the addition of 'but it often doesn't feel like fun'. If you then asked her why she stays in her job if it often lacks enjoyment, you would likely get an answer such as 'I couldn't do anything else, this is my life'."
The verdict
Andrews says: "This is a fair description of me, although I am also driven by profit - if not the business wouldn't survive. However, my business partner is more of a 'money maker' so there's a good balance.
"The point about not changing our energy supplier made me laugh. I trust my operations manager to sort out things like that and she is currently battling with our energy supplier. We have a good relationship with the bank manager and meet in person regularly. I would switch if there was a lack of personal contact.
"This profile would help anyone target me with the right type of products and in the most effective way. I usually bin anything that looks too corporate and dull."