The B2G Manifesto: Structured approach to Business-to-Government marketing and public sector market segmentation

Abstract

The B2G - Business-to-Government market is relevant and distinct from other markets such as B2B or B2C – retail, consumer. B2G is huge, but opportunistic, poorly defined, not researched. While large amounts of data are available, there are no systematic market research tools or methods.
This paper proposes a structured, systematic approach to the B2G market, building on methods already established from B2B and B2C.
We propose a definition of the B2G – public sector market, and introduce specific B2G market segmentations such as Governmentgraphics.

Full text

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The B2G Manifesto:
Structured approach to Business-to-Government
Stefan Morcov
1
• B2G - Business-to-Government is a relevant marketing and sales area, distinct from B2B or B2C.
• B2G is huge and opportunistic. It is poorly defined and not researched. While there are
mountains of data available and a strong need, there are no repeatable methods or tools.
• We attempt to define B2G. We then introduce specific B2G segmentations and metrics, such as
Governmentgraphics.
• We propose a structured, systematic approach to B2G strategic marketing, which builds on
already established B2B/B2C methods.
Keywords: B2G Business-to-Government, Governmentgraphics, segmentation,
B2C Business-to-Consumer, B2B Business-to-Business, firmographics, marketing, sales,
public sector, public procurement, tendering.
1. Introducing B2G marketing
Business-to-Government (B2G) is the sale and marketing of goods and services to international, national, federal,
regional, and local public administration.
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B2G is a fundamental market, alongside Business-to-Consumer (B2C) and Business-to-Business (B2B).
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The concept is novel, and the terminology is still being
defined. Some other terms used are: B2PA Business-to-
Public-Administration; B2PS - Business-to-Public-Sector;
PS public sector; PP public procurement.
The B2G domain is relevant: public sector represents 54%
of EU GDP, and 47% of US GDP. Public sector procurement
amounts to 14-20% of GDP.
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. More than 60% of Fortune
1000 companies are active on the B2G market, with
government customers generally having a positive impact
on a firm’s value.
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The domain is recognized, but has not been yet
researched: there are almost no published articles or
books on this topic. 9
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1.1. B2G market characteristics
The B2G (public sector) market is very different from B2C, and distinct from B2B.
B2G actors, products, and opportunities have characteristics which are specific, relevant, and distinctive. Public
sector organizations are:
• Bureaucratic, formal.
• Long decision cycle, management by committee – comitology.
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• Parkinson's law: work expands so as to fill the time available for its completion.
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• Hofstadter's law: it always takes longer than you expect, even when you take into account this law.
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• The Pygmalion effect, or Rosenthal effect: is the phenomenon whereby higher expectations lead to
an increase in performance.
Public sector projects are:
• Large or very large.
• Complex.
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• Critical.
• Complex stakeholder map.
• Complex regulatory environment.
• Driven by political agenda and influenced by varied political interests, formal and informal.
• Vulnerable to political change, which might change priorities and discontinue or derail projects.
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The B2G market is characterized by:
● Fewer buyers than in B2C or B2B, thus fewer marketing segments.
● Fewer opportunities.
● Individual opportunities are significantly larger in B2G.
○ In fact, black swan projects are more likely to occur: rare, mammoth projects, particularly large,
that disrupt the market significantly. 29
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○ Thus, it is more difficult to use traditional statistics methods.
○ In contrast, the B2B market operates according to the 80-20 Pareto rule: 20% of customers
generate 80% of revenue. The B2C market generally follows a normal Gaussian distribution, due
to higher numbers. 29
● The sales cycle is much longer (up to several years).
● The barriers to entry and corresponding costs are higher - especially for SMEs.
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● The B2G market is more stable than B2B, and much more stable than B2C. This means that segmentation
variables are also more stable, and data can be used longer. 29 9
● The procurement process is formal. It includes specific formal bid/tendering procedures.
● Public procurement is in principle more transparent, and more data is publicly available.
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● Contrary to B2B or B2C, B2G buyers are neither manufacturers, nor consumers.
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● B2G buyers are driven by political objectives, in contrast to B2C or B2B which are driven by commercial
and financial objectives. 9
A comparative analysis of the differences between B2C, B2B, and B2G is presented below. Business-to-Big-
Business (B2BigB) is a stepping stone between B2B and B2G.

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Table 1. Market comparison: B2C, B2B, and B2G
B2G
B2BigB
B2B
B2C
Project/deal size
Very Large, huge
Very large
Medium
Small
Diversification
Low (few buyers)
Low
High
Very high
Fragmentation
Low (few contractors)
Low
High
Very high
Negotiation power
Buyer
Buyer
Shared
Seller (non-negotiables)
Process &
purchase criteria
Formal (references,
CVs, turnover,
certifications)
Semi-formal.
Networking,
quality, price
Informal.
Quality, price
Informal.
Quality, price
Sales cycle
Long, formal
Long, heavy
Medium
Short, informal
2. B2G market segmentation
Market segmentation is the identification of the most important, significant differences among customers that
will influence their purchase decisions or buying behavior, while keeping the scheme as simple as possible.
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The objective of market segmentation is to make targeting and product positioning decisions.
Segmentation variables are characteristics defining key differences in customer behavior. They must be:
• Relevant, aka meaningful.
• Identifiable, aka distinct, and measurable.
• Substantial, aka sizeable; i.e. relevant to a substantial group of customers.
• Responsive, actionable, and stable in relation to a marketing strategy. 26
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Marketing analysis follows mostly a quantitative approach. Contemporary marketing relies on the considerable
amount of available data, and on the significant opportunities offered by data science, in order to extract
qualitative conclusions; to transform raw data into information, and into knowledge.
The analysis of the segmentation variables can be:
• Cross-sectional (static).
• Longitudinal (dynamic), which includes the analysis of trends.
B2G relies on already established B2B/B2C methods. In fact, business marketing, including B2B and B2C, is a solid,
well-researched domains and fields of study.
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2.1. Market segmentation based on traditional B2B/B2C methods
The traditional B2C marketing segmentation is based on:
• Geographics.
• Demographics.
• Psychographics.
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• Behavior.
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These are translated to B2B macro-segmentation as:
• Geographics. Where.
• Firmographics (or emporographics) – which is similar to demographic; i.e. company features, the
characteristics of the buying organization. Who.
• Product and product usage. What, and How much.
• Benefits desired, i.e. needs, preferences and desired relationship. Why.
• Purchase Behavior. How.
• Attitudes, or psychographics (What they think). 29
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Micro-segments are homogenous groups of buyers within the macro-segments 26. Sometimes the same variables
are listed by literature as macro, and sometimes as micro-segmentation.
The most commonly used B2B segmentation variables are:
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● Geographic location of customers.
● Geographic coverage.
● Firmographics
● - also known as emporographics, or feature based segmentation. It is the B2B equivalent of the B2C
demographic segmentation.
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. It is feature-based, and includes characteristics such as:
o Company / organization size.
o Industry, or vertical, or business domain.
o Type of organization.
● Benefit segmentation: the product's economic value to the customer.
● Technology, brand (operating variables).
● Business potential, including size, budget, spending, and trends.
● Purchasing strategies, e.g.:
o Global vs. local decision-making structure.
o Structure of the decision-making unit.
o Decision-making power of purchasing officers vs. engineers or technical specifiers.
● Supply Chain Position.
● Situational factors: perceived importance of the product to the customer's business, application, urgency,
size.
● Psychographics, or attitudes towards the supplier: personal characteristics of buyers, such as age,
education, job title and decision style, character, approach.
The industries, suppliers, and products are classified according to various segmentations such as:
● Market-based classification systems such as the Global Industry Classification Standard (GICS), the
Industry Classification Benchmark (ICB) and The Refinitiv Business Classification (TRBC) are used in finance
and market research.
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● Supplier segmentation approaches.
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● Product classification.
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2.2. B2G segmentation. Governmentgraphics
B2G segmentation has specific particularities compared to B2B and B2C:
● Geographics: the location of suppliers is also an important variable, besides the location of the customers.
● There are specific language requirements.
● Regulatory environment and applicable legislation. 9
● The feature-based segmentation of public procurement institutions is different.

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● Due to comitology, psychographics and
the analysis of attitudes and behavior
are less relevant for the B2G market 12.
This is aligned with the perception of
analysts that purchasing behavior is
more rational in B2B than in B2C. 29
Therefore, in addition and complementary to
traditional B2B/B2C segmentation, we propose
a specific approach for B2G marketing.
Governmentgraphics is the specific B2G
segmentation approach, which analyzes
specific variables and indicators. It is a feature-
based segmentation. It is similar to
firmographics in B2B, and to demographics in
B2C marketing.
Our proposed approach to B2G consists of the
following segmentation categories:
Table 2. B2G segmentation categories
Segmentation
Question
Examples
Governmentgraphics
Who buys
Authority type, activity (sector), regulation, level, size.
Firmographics
Who sells
Industry (vertical), company size, type.
Geographics
Where
Location of authorities and of suppliers. Coverage.
Product
What
Product, industry, technology, brand
(operating variables).
Cost
How much
Customer budget. Product price.
Procurement behavior
How
Procedures, regulations.
Business objectives
Why
Benefits. Needs.
Psychographics
What they think
Attitudes. Behavior.
Figure 1. B2G segmentation

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Table 3. B2G segmentation variables
Authority type
International organization, national or federal institution, national agency, regional
authority, local authority, utilities entity, institution governed by public law, private
non-government organization, private for-profit organization. 42
Activity (domain,
vertical)
Health, defense, social security, employment, education, environment, transport.
Level
International, national, regional, local.
Value
Transactional, or monetary segmentation:
• Market size, i.e. the total value of all projects.
• Budget - a proxy for market size.
• Average project size.
Regulation
Applicable legislation and regulatory environment.
In addition to the proposed macro-segmentation, we also introduce a set of transactional indicators for
Governmentgraphics segmentation, describing recency, frequency, and monetary market characteristics. These
indicators are contextual:
Table 4. B2G transactional indicators
Market diversification
Number and variety of contractors (suppliers).
Market fragmentation
Number and variety of authorities, projects, or procurement procedures.
Partnership appetite
The overall openness to partnership.
Partnership affinity
The strength of the relation between 2 specific authorities and contractors.
The set of all relations form a market affinity graph.
Entry difficulty
The openness to new suppliers, or the difficulty of the entry-barriers.

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3. B2G strategic marketing
The essence of strategic marketing is: segmentation, targeting, and positioning.
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A marketing strategy consists therefore of:
• Segmentation, i.e. the contextual, relevant analysis of the market.
• Positioning, i.e. the analysis of the current position on the market.
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• Targeting, i.e. the analysis of the desired position on the market.
• Plan for transitioning from the current to the target market position.
Figure 2. Marketing strategy

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Bibliography and Notes
1
Stefan Morcov is a Computer Science Engineer, with an Executive MBA from Tiffin University Ohio, and a PhD in
Engineering from KU Leuven.
He has 22 years’ experience in IT, management, business development & sales, HR, marketing, project and program
management. He created and managed 3 successful companies in Belgium, Luxembourg, and Romania, and managed
operations on 3 continents.
He is currently working on developing a structured approach for B2G marketing and sales. Based on this theoretical
foundation, he also started to develop Hermix – an innovative IT product, that aims to support strategic B2G marketing, by
analyzing and segmenting the public sector market; charting market positions, projects and players; in order to identify
opportunities, support decision-making, and accompany suppliers in their sales and bid process.
2
https://dictionary.cambridge.org/dictionary/english/b2g
3
https://www.thesmbguide.com/business-to-government
4
A few articles consider B2G to be a form of e-commerce, or e-procurement, and sometimes a subset of e-government. We
disagree with such approaches and definitions.
We take a marketing approach to B2G, not an ICT perspective. Therefore, our definition of B2G – Business-to-Government
intentionally encompasses all marketing and sales activities where the buyer or financier is the public sector; regardless of
the sales or marketing channels employed.
This definition and approach is aligned with the state-of-the-art definitions of B2C and B2B marketing and sales, which also
do not differentiate on the sales or marketing channel.
5
https://www.investopedia.com/terms/b/business-to-government.asp
6
European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (2021). An analysis
of SMEs’ needs in public procurement.
7
Statista. Public spending ratio in the member states of the European Union in 2020.
8
Trading Economics, from Eurostat.
9
Brett W. Josephson, Ju-Yeon Lee, Babu John Mariadoss, & Jean L. Johnson (2019). Uncle Sam Rising: Performance
Implications of Business-to-Government Relationships. 83(1) 51-72. doi:10.1177/0022242918814254
10
Grewal, Rajdeep, Lilien, Gary L. (2012). Business-to-Business Marketing: Looking Back, Looking Forward. In Handbook of
Business-to-Business Marketing. Cheltenham, England: Edward Elgar, 3–14
11
We were not able to identify peer-reviewed scientific articles that define or study the B2G - Business-to-Government
marketing and sales.
Various articles mention the term, but there is no attempt at a rigorous definition or study of the domain.
Most articles mention the term as a secondary topic or an example, without studying it. Some articles research particular
situations, such as corruption in some countries. There are several studies on the impact of e-government, e-commerce
tools, data-exchange, or open-data policies, in public procurement or in citizen relationship management (CRM). There are
several commercial documents that mention the term.
The databases searched were: the entire KU Leuven library, including SSCI, SCIE, Emerald, Pro Quest, Scopus, Springer,
Taylor & Francis etc.
The search keywords were: B2G, Business-to-Government.
Examples of search strings and results:

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Title contains B2G and any field contains ”marketing”
8 articles - none of them relevant.
In contrast: Title contains (B2C or B2) and any field
contains ”marketing”
4639
Title contains "Business-to-Government"
78
In contrast: Title contains "Business-to-Business" or
"Business-to-Consumer"
4,181
12
European Commission. Comitology
13
Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules
and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing
powers
14
Parkinson, C. N. (1958). Parkinson's law: or, The pursuit of progress. London: John Murray
15
Gödel, Escher, Bach: An Eternal Golden Braid. 20th anniversary ed., 1999, p. 152. ISBN 0-465-02656-7
16
Morcov, S. (2021). Managing Positive and Negative Complexity: Design and Validation of an IT Project Complexity
Management Framework. PhD thesis, KU Leuven University
17
Morcov, S. (2020). Complexity & innovation in public sector IT projects - The supplier perspective. KU Leuven
18
Taleb, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. Random House
19
European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (2021). An analysis
of SMEs’ needs in public procurement
20
EU projects are specifically transparent. See also:
European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (2021). Study on the
measurement of cross-border penetration in the EU public procurement market
21
https://living-in.eu/news/business-government-b2g-data-sharing-workshop-5th-and-final-workshop
22
https://data.europa.eu/en/datastories/business-government-b2g-data-sharing-europe
23
Projects related to security are less transparent - e.g. NATO procurement is rigorous, but not transparent.
Procurement transparency is linked to democracy and corruption (Bajpai,Rajni; Myers,C. Bernard. Enhancing Government
Effectiveness and Transparency : The Fight Against Corruption. Washington, D.C. : World Bank Group)
Notably, UN institutions communicate very little information regarding their procurement process. In fact, UN institutions
never publish or communicate who are the winners, the winning prices, or award criteria. There are subsequently
numerous issues signaled related to UN procurement, such as:
Akanksha Arora (2022). How the UN Has Been Reduced to Corrupt Deal-Making and Rule-Breaking. News18.
David A. Fahrenthold and Farnaz Fassihi (2022). A Pot of U.N. Money. Risk-Taking Officials. A Sea of Questions. The New
York Times.
Fox News (2015). U.N. Procurement Scandal: The Case of the Official Who Never Was.
24
Michèle Rivasi, Committee on Budgetary Control, European Parliament (2021). Report on the evaluation of preventive
measures for avoiding corruption, irregular spending and misuse of EU and national funds in case of emergency funds and
crisis-related spending areas
25
Kumar, Vinod; Raheja, Gagandeep (2013). Business to business and business to consumer management. INTERNATIONAL
JOURNAL OF COMPUTERS & TECHNOLOGY. 3 (3). CiteSeerX 10.1.1.299.8382
26
Webster, Fredrick (1991). Industrial Marketing Strategy. Third Edition. John Wiley & Sons

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27
Simplicity is defined and used according to the principle of Occam's Razor.
28
Gavett, G. (2014). What You Need to Know About Segmentation. Harvard Business Review
29
David Willan (2015). Circle Research White Paper: B2B Market Segmentation. Circle Research (currently Savanta)
30
Roberto Mora Cortez, Ann Højbjerg Clarke, Per Vagn Freytag (2021). B2B market segmentation: A systematic review and
research agenda. Journal of Business Research. (126): 415-428. ISSN 0148-2963. doi:10.1016/j.jbusres.2020.12.070
31
Wells, W. D. (1975). Psychographics: a critical review. Journal of Marketing Research. 12: 196– 213.
32
Wedel, M., & Kamakura, W.A., Market Segmentation: Conceptual and Methodological Foundations, Springer Science &
Business Media, 2010, pp 8-9
33
Weinstein, Art (2004). Handbook of Market Segmentation – Strategic Targeting for Business and Technology Firms.
Third edition. Haworth Press
Weinstein, Art, & Jamieson, Frank (2016). B2B Segmentation white paper: B2B market segmentation. 5 key segmentation
dimensions. doi: 10.13140/RG.2.1.4661.3520
34
Bonoma & Shapiro (1984). Segmenting Industrial Markets, Lexington Books. macro segmentation level. Harvard Business
Review
35
Hutt, Michael D., & Speh, Thomas W. (2004). Business Marketing Management: A Strategic View of Industrial and
Organizational Markets (8th ed.). Thomson/South-Western. ISBN 978-0324190434
36
Weinstein, A. (2013). Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms. 3rd Ed.
Routledge.
37
https://en.m.wikipedia.org/wiki/Firmographics
38
Mitchell, Vincent-Wayne; & Wilson, Dominic F. (1998). Balancing Theory and Practice. Industrial Marketing Management.
27 (5): 429–445. doi:10.1016/S0019-8501(98)00002-9.
39
https://en.wikipedia.org/wiki/Industry_classification
40
Numerous proposed supplier segmentation approaches and methods, e.g. listed on Wikipedia: Parasuraman (1980),
Kraljic (1983), Dyer et al. (1998), Olsen and Ellram (1997), Bensaou (1999), Kaufman et al. (2000), van Weele (2000), Hallikas
et al. (2005), Rezaei and Ortt (2012)
41
https://en.wikipedia.org/wiki/Product_classification
42
Publications Office of the European Commission (2020). Ted Help Pages.
43
Weinstein, Art (2014). Segmenting B2B technology markets via psychographics: an exploratory study. Journal of Strategic
Marketing. 22(3): 257–267. http://dx.doi.org/10.1080/0965254X.2013.876072
44
Kotler, P., & Keller, K. L. (2010). A framework for marketing management (12th ed.). Upper Saddle River, NJ: Prentice-Hall.
45
Market positioning can thus be defined as: the analysis of the current position, of a specific market player, in a specific
market, based on a specific, relevant market segmentation.