2 Why Segmentation ? Better matching of customer needs Enhanced opportunity for growthRetention of customerTargeted IM CommunicationsShare of the Market SegmentEnhanced operational efficiencyBetter share of customer wallet
3 High-Growth Companies Succeed By: Selecting well-defined groups of potentially profitable customers.Focusing marketing resources on acquiring, developing, and retaining profitable customers.Developing distinctive value propositions.
4 Five Criteria for Evaluating Potential Market Segments MeasurabilityAccessibilitySubstantialityCompatibilityResponsiveness
5 Criteria for effective Segmentation MeasurableSize , Purchasing Power, profiles of segments can be measuredSubstantialSegments must be large or profitable enough to serveAccessibleSegments can be effectively reached and servedDifferentialSegments must respond differently to different marketing mix elementsActionableMust be able to attract and serve the segment
6 Segmentation Benefits Attunes marketer to unique needs of customer segmentsFocuses product development efforts, develops profitable pricing strategies, selects appropriate distribution channelsProvides valuable guidelines to allocate marketing resources.
7 Bases for Segmenting Business Markets Macro segmentationMicro segmentation
8 Business Marketing Segmentation GeographicCustomer TypeCustomer SizeProduct UseBusinessMarketsPurchasing CriteriaPurchasing StrategyImportancePersonalCharacteristicsMicro-segmentationMacro-
9 MAJOR SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS DemographicIndustry : which industries that buy this product should we focus on ?Company size ; what size companies should we focus on ?Location : what geographical areas should we focus on ?Operating VariablesTechnology : what customer technologies should we focus on?User/non-user status : should we focus on heavy, medium, light users or non-users?Customer capabilities : should we focus on customers needing many services or few services?Purchasing ApproachesPurchasing function organization : should we focus on companies with highly centralized or decentralized purchasing organizations?General purchase policies: should we focus on companies that prefer leasing ? service contracts? systems purchases? sealed bidding?Purchasing criteria; should we focus on companies that are seeking quality? service ? price?
10 Situational FactorsUrgency ;Should we focus on companies that need quick and sudden delivery or serviceSize of order : Should we focus on large or small ordersOrganizational Characteristics (Personal )Buyer –Seller similarity : People and values are similar to oursAttitudes toward risk : Risk taking or risk avoiding customersLoyalty (or Attitude) : Should we focus on companies that show high loyalty to their suppliers
11 Purchasing Strategy Classifications Satisficers approach given purchasing requirement by contacting familiar suppliers and placing order with first supplier to satisfy product and delivery requirements.Optimizers consider numerous suppliers, familiar and unfamiliar, solicit bids, and examine all alternative proposals carefully before selecting supplier.
12 Meaningful Micro Segments Importance of Purchase -- appropriate when product is applied in various ways by various customersAttitudes toward Vendors – analysis of how various clusters of buyers view alternative sources of supply often uncovers opportunitiesOrganizational Innovativeness – some organizations innovate more and are willing to purchase new industrial products than othersPersonal Characteristics – although some interesting studies have shown viability of segmentation based on individual characteristics, further research needed to explore potential as valid base for micro segmentation.