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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMe dia Presentations

Segmentingthe Business

Market

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Selecting well-defined groups

of potentially

profitable

customers.

High-Growth

CompaniesSucceed By:

Focusing

marketing

resources on

acquiring,

developing,

and retaining

profitable

customers.

Developing

distinctivevalue

propositions.

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Five Criteria for Evaluating Potential

Market Segments

Measurability

Accessibility

Substantiality

Compatibility

Responsiveness

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Technological Environment Assessment

1. Product technologyset of ideas embodied in

product or service.

2. Process technologyset of ideas or steps

involved in production of product or service.

3. Management technologymanagement

procedures associated with selling product.

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Segmentation Benefits

Attunes marketer to unique needs of customersegments

Focuses product development efforts, developsprofitable pricing strategies, selects appropriatedistribution channels

Provides valuable guidelines to allocatemarketing resources.

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Bases for Segmenting Business Markets

Macrosegmentation

Microsegmentation

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Macro level bases of segmentation

Macrolevel segmentation

bases concerned with

general characteristics of

buying organization,nature of product

application, and

characteristics of buying

situation.


variables Illustration

Size/geograp

hical location

L/M/S based on sales &

no. of employees

Usage rate Non user, moderate

Structure of

procurement

Centralized vs.

decentralized

Value in use High, low

Types of

buying

situation

New, modified, straight

Stages in

purchase

Early, late

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Marketers often find it useful to divide each macro-segment

into smaller micro-segments based on similarities and

differences among decision-making units.

Selected Microlevel Bases of Segmentation


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Purchasing Strategy Classifications

1. Satisfiers 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.

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Meaningful Micro-segments

Importance of Purchase -- appropriate when product is applied invarious ways by various customers

Attitudes toward Vendors analysis of how various clusters ofbuyers view alternative sources of supply often uncovers opportunities

Organizational Innovativeness some organizations innovate moreand 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.

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Philips micro segmentation

Philips identified that

purchasing manages

emphasize two criteria I

purchasing light bulbs.

How much they cost and howlong they last?

Price and life of bulb did not

account for the total cost of

lighting. Environmentally toxic

mercury, companies facedhigh level disposable cost at

the end of a lamps useful life.

New product and

segmentation strategy

To capitalize on a perceived

opportunity, Philips introduced

the alto, an environmentfriendly bulb to reduce

customer overall cost. They

now focused CFOs who

embraced the cost savings and

PRE (public relations) who

saw the benefits of purchasing

actions.

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Discussion-1

An emerging high-technology firm develops and sells a line ofelectronic software products and services that enable businesses toengage in business-to-business communications and transactionswith suppliers and customers. The firms products and services areused by retailers such as West side, big bazaar etc., manufacturers

like Pidilite, apparel firms like Lakhani, and insurance firms andothers. The firm needs your assistance in segmenting this vastpotential market that includes most types of businesses.

First, suggest possible bases of segmentation that the high-tech firmmight use in isolating potential clusters or segments of customers.Next, provide a set of guidelines that the firm might follow in

evaluating whether or not a particular base of segmentation providesan appropriate market andstrategic fit for the firm.

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Discussion-2

Your first task as a product manager at DowChemical is to evaluate the market segmentationstrategy followed by your predecessor. For the

past four years, this manager had been dividingthe market on the basis of Size and developing aseparate marketing strategy for each of 5different industries. Describe the specific stepsthat you would follow in evaluating the existing

segmentation plan. What factors might promptyou to seriously consider making a change inthe existing segmentation approach?

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