segmenting b2b markets anand g. khanna. why segmentation ? 1. better matching of customer needs 2....
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Segmenting B2B Markets
Anand G. Khanna
Why Segmentation ?
1. Better matching of customer needs
2. Enhanced opportunity for growth
3. Retention of customer
4. Targeted IM Communications
5. Share of the Market Segment
6. Enhanced operational efficiency
7. Better share of customer wallet
Selecting well-defined groups of potentially profitable customers.
High-Growth Companies Succeed By:
• Focusing marketing resources on acquiring, developing, and retaining profitable customers.
• Developing distinctive value propositions.
Five Criteria for Evaluating Potential Market Segments
• Measurability
• Accessibility
• Substantiality
• Compatibility
• Responsiveness
Criteria for effective Segmentation
Measurable Size , Purchasing Power, profiles of segments can be measured
Substantial Segments must be large or profitable enough to serve
Accessible Segments can be effectively reached and served
Differential Segments must respond differently to different marketing mix elements
Actionable Must be able to attract and serve the segment
Segmentation Benefits
• Attunes marketer to unique needs of customer segments
• Focuses product development efforts, develops profitable pricing strategies, selects appropriate distribution channels
• Provides valuable guidelines to allocate marketing resources.
Bases for Segmenting Business Markets
Macro segmentation
Micro segmentation
Business Marketing SegmentationGeographic
Customer Type
Customer Size
Product UseBusinessBusinessMarketsMarketsBusinessBusinessMarketsMarkets
Purchasing Criteria
Purchasing Strategy
Importance
Personal Characteristics
Micro- segmentation
Micro- segmentation
Macro- segmentation
Macro- segmentation
MAJOR SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS
Demographic Industry : 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 Variables Technology : 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 Approaches Purchasing 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?
Situational Factors Urgency ;Should we focus on companies that need quick and sudden
delivery or service Size of order : Should we focus on large or small orders Organizational Characteristics (Personal ) Buyer –Seller similarity : People and values are similar to ours Attitudes toward risk : Risk taking or risk avoiding customers Loyalty (or Attitude) : Should we focus on companies that show high
loyalty to their suppliers
Purchasing Strategy Classifications
1. Satisficers approach given purchasing requirement by contacting familiar suppliers and placing order with first supplier to satisfy product and delivery requirements.
2. Optimizers consider numerous suppliers, familiar and unfamiliar, solicit bids, and examine all alternative proposals carefully before selecting supplier.
Meaningful Micro Segments Importance of Purchase -- appropriate when product is applied in
various ways by various customers
Attitudes toward Vendors – analysis of how various clusters of buyers view alternative sources of supply often uncovers opportunities
Organizational Innovativeness – some organizations innovate more and are willing to purchase new industrial products than others
Personal 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.
Figure combines these macro segment bases and outlines steps required for effective segmentation.
Source: Adapted by permission of the publisher from Yoram Wind and Richard Cardozo, “Industrial Market Segmentation,” Industrial Marketing Management 3 (March 1971): p. 156. Copyright 1974 by Elsevier Science Publishing Co., Inc.
An Approach to Segmentation of Business Markets
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