As a proud member of the Research & Analytics team here at OpenView Labs, I spend much of my time doing market research for portfolio companies.
As it turns out, there’s some confusion about what exactly separates these two types of research, both in our portfolio and broadly on the internet. I’m writing this blog to clear up that confusion, defining each, and explain why they’re both necessary when you’re developing your go-to-market strategy.
Simply put, the difference between segmentation and buyer research is the unit of analysis:
Segmentation evaluates which organization makes the best customer. For B2B, this is usually a company, non-profit, or political entity. The corollary for B2C is usually a household.
Buyer research, meanwhile, looks within a target organization and evaluates the individual(s) involved in that organization’s buying process. For a software product, this could be the CIO and CFO at a target company.
The confusion often comes from B2C products aimed at individuals where the buyer is an individual with no relevant ‘organization’ around them. In these scenarios, segmentation and buyer research are synonymous and interchangeable.
However, this isn’t always true for B2C products. For instance, although a cable company is undoubtedly B2C, market research can be analyzed both via a segmentation question and a buyer research question:
Segmentation Question: Which households are most likely to buy our product?
Totally Made-up Answer: Suburban households with income above $100,000 and access to one or no competing cable operators.
Buyer Research Question: Who are the key buyers and how do we reach them?
Totally Made-up Answer: Dads listen to the radio on their way to work and want uninterrupted access to the maximum number of channels. Moms primarily use the internet for research and are more cost sensitive. Kids exert zero influence on the process.
This is essentially the same framework we’d use when evaluating a B2B company. We strongly advise our companies to begin with segmentation. Otherwise, the universe of potential buyers (usually 1-3 in each segment) is far too large to effectively analyze in a systematic way. Once we’ve identified the handful of segments that are their best targets, we can dive into those segments to learn more about the buyers.
Ultimately, both types of projects are necessary to build a comprehensive understanding of how your product gets bought and sold. Knowing which organizations to approach, who to approach within the organization, and how to approach them, together forms the foundation of your go-to-market strategy, and segmentation and buyer insights projects are the best way to answer those questions.
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