Why do people use SIC codes as a basis for B2B segmentation?

Even though I work predominantly in B2B marketing, I have never used SIC codes or demographics to segment a market. In fact, I’ve never used them when discussing B2C marketing either! I’ve always used the needs of the potential customer, but real needs are not easy to determine and are rarely articulated.

I believe that organisations should create their own segmentation rather than use an ‘industry standard’. Only in this way will the organisation get real insight into their customers’ needs, innovate effectively, and create competitive advantage! These are the things that help a company to grow.

One of my previous roles was to lead the marketing for a telecoms equipment vendor. Our customers were typically large telecoms operators. Historically, their segmentation was done using an ‘industry standard’ categorisation as used by Gartner et al. This was based on the history of the customer e.g. Incumbent, New Entrant, etc. It was irrelevant to their needs and buyer behaviour; a bit like ‘segmenting the car market by shoe size’. So we changed the segmentation and based it not on the size or history or services of the customer, but on their strategy. Their strategy determined where they were going to invest in the future, and what products and services they would want to buy from us in the future.

I should add that it took two years to get the whole of the company to change the segmentation…