It’s time for a new approach to B2B market segmentation

2022-01-10 Mark Newman, Chief Analyst, TM Forum

Little has changed in how telecom operators segment their B2B markets over the last 20 to 30 years.  But B2B is changing. Businesses are moving to embrace digitization. They want to improve the digital experiences that they are offering their own customers. And they have a growing belief in the transformative power of new technologies such as cloud computing and the IoT. Business people, and in particular those who make technology purchasing decisions, want access to services that are as simple, intuitive and affordable as the ones they use as consumers.

B2B segmentation is all about size. It starts with the single/small office/home office and the small-and-medium-sized business and progresses all the way up to multinational corporations. The larger the account the more likely the operator is to allocate an account manager and the smaller the account, the more chance that the business will be treated like a consumer or a residential customer. Many operators use distributors to manage SMEs and, in some cases, large enterprises, because they do a better job than operators’ own sales teams.

As telecoms operators consider what role they want to play in B2B digitization and the services and capabilities they want to provide they will need to examine how to segment the market and provide the right customer experience for each segment.

Rather than simply deciding what products and services to offer based on the size and location of each business, operators will need to consider how their customers plan to use their services. In the 5G era telecoms operators will focus on use cases supported and enabled by connectivity, The size of the business will be less relevant – when it comes to segmentation – than how the connectivity is being used. Let’s take for example, connectivity that supports a medical device or procedure. This could be marketed both to a medical consultant that runs their own business and to a medical trust or state-owned department that employs tens or hundreds of thousands of people.

Furthermore, operators may need to take a different approach to market segments for some products – for example basic connectivity services – than for other products and services where they are going to market in a platform business model or with an end-to-end product. For example, global telecoms group Vodafone is delivering end-to-end products and services for the automotive and insurance verticals but may only offer connectivity solutions for other verticals. Very few operators will have the expertise or resources to develop advanced product and service capabilities for a whole range of different vertical sectors.

As operators adopt a hybrid approach to market segmentation based on size and vertical market, it is important that they review the customer experience that goes with the product and service. When it comes to new capabilities in cloud, IoT and security, operators will increasingly seek growth in professional and IT services rather than connectivity. Account managers will be business-problem solvers rather than order-takers for connectivity solutions.

Better digital experiences will be essential for all B2B customers. Self-service needs to become the norm with operators handing over control for how and when services are consumed to their customers. Future product development should be based on the data that operators collects from how customers are using their services. And there is a strong case for serving more customers directly – rather than through distributors – if operators can deliver highly-customized experiences for their customers.

In January 2022 we will publish a new research report, A New Approach to B2B Customer Segmentation, which will explore these themes in more detail. Finding the right approach, and the optimal segmentation strategies is complex and will require the transformation of legacy back-end systems. But it is already clear that doing nothing is not an option and that the simple segmentation strategies that have served the industry until now will need to evolve.

2022-01-10

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