BUSINESS MARKETING

UNIT IV: SEGMENTATION OF

INDUSTRIAL MARKETS

RAKSHIT NEGI, D.PHIL.

ADDIS ABABA UNIVERSITY SCHOOL
OF COMMERCE

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OUTLINE…
• Nature of Market Segmentation
• Segmentation Bases
–Macro, Intermediate & Micro
• Evaluating Potential Market
Segment
• Positioning Strategies
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A Review…
• What are the factors that affect buying
decisions?
• What steps consist of business buying
process?
• What are the motivations of business
buyers and what abilities does a
marketer need to be able to respond to
them?
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Business Market Segmentation…
• The practice of dividing a business market into
distinct groups of buyers with similar
requirements and that will respond similarly to
a specific set of marketing actions.
• Develops foundation of the marketing strategy
process and the driver of resource allocation.
• Goal is to divide larger markets into smaller
groups that are homogeneous with respect to
their response to marketing-mix.
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 Continued…
• To be successful, the business marketer must:
– identify, analyze, and evaluate potentially attractive
market segments;
– target the segments to serve; and
– develop and communicate a positioning strategy that
will differentiate the firm’s offerings from others.
• Therefore, segmentation can assist firms in:
– Market analysis (know how & why customers buy)
– Market selection (fitting with firm’s capabilities)
– Marketing management (competitive advantage)
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Continued…
• Market Segmentation links Market Needs to
an Organization’s Marketing Actions
Identify market Take marketing
needs and actions
Benefits in terms Process of (marketing
of: segmenting program) in terms
*Product features of:
and
*Expense *Product
targeting
*Quality *Price
markets
*Savings in time *Place
and convenience *Promotion

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 Segmentation Strategies…
• Undifferentiated Marketing (Market aggregation)
– Used by firms offering homogeneous products, Cost Economic
Company marketing mix Market
• Differentiated Marketing (Distinguish a product)
– Promotes non-price competition, Increases cost
Marketing mix 1 Segment 1
Marketing mix 2 Segment 2
• Concentrated Marketing (one/few segments)
– Achieving strong market position in the segment, operating eco.
Company marketing mix Segment 1
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Approaches to Market Segmentation…
1) Macro/Micro segmentation
– Macro segmentation involves dividing the
market into subgroups based on overall
characteristics of the prospect organization
(size, type & location)
– Micro segmentation involves dividing the
market into subgroups based on specific
characteristics of the decision-making
process and the buying structure within the
prospect organization (authority, attitudes
etc.) 8
 Continued… General, Emporographics (Organizational
Demographics)
observable
2) The Nested Approach (Macro)  Industry
 Company size
 Location

*Distinguishes between macro Operating variables

 Technology
and micro segments  User-nonuser status
 Customer capabilities (financial)

*Assumes a hierarchical Purchasing approaches

 Organization of DMU
structure that moves from (Intermediate)  Purchasing policies
 Purchasing criteria

broad/general bases for Situational factors

 Urgency
segmentation to very specific  Application
 Size of order
bases. Personal
characteristics
*More specific customer  Motivation
 Buyer-seller 1 -1
characteristics are nested relationship
 Risk perceptions
Specific, subtle
inside the broader (Micro)
organizational basis 9
 Continued… Type of
economic
activity
Agriculture, forestry, fisheries
Mining
Construction
Manufacturing
3) Segmentation for Transportation
Communication
Maturing Markets Wholesales trade
Retail trade

– Some firms try to Number of establishments

Number of employees
Volume of shipments
segment on size, Size
Sizeof of
organization
organization
Annual sales

industry, or products Global regions

Nations
alone, which is Segmentation
Categories of
National regions
Geographic States
rarely sufficient Variables
location Counties
Cities

– Considerable value Neighborhoods

Climate
Terrain
can often be gained Population density
Market density
by attempting to Product
How used
usage
Usage rate
move toward
Centralized
buying-behavior Structure of the
procurement
Decentralized
Buyer center
based segmentation function Buyer situation 10
 Continued…
4) Segmentation by purchase responsibilities of
individuals within organizations
– A firm’s market may be segmented by purchase
responsibilities , which may lead to more effective
deployment of marketing resources
– Represents an attempt to reduce some of the
complexity involved in understanding buying center
5) Other Approaches to Market Segmentation
– User status/Industrial Classification System (ICS)
– Degree of customer loyalty, and
– Customer attitude toward the product(s) 11
Evaluating Potential Market Segment…
• The Profitability Analysis
– Desirable size and growth characteristics attached
with the segment may not make it attractive from
profitability point-of-view
– Looking for collective power of Porter’s 5-forces
• The Competitive Analysis
– Analyzes the number and types of competitors
– Answers the questions as to how many competitors
are there? What are their strengths and
weaknesses? What is their market share?
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Positioning Strategies…
• Positioning refers to the way a product is
defined by customers on important attributes,
or the place the product occupies in customers’
minds relative to competing product
• Perceptual mapping is a technique for
examining a product’s position, relative to
strengths and weaknesses of the product, as
compared to competitors
• When the firm establishes and maintains a
distinctive place for itself and its offerings in the
market, it is said to be successfully positioned 13
Continued…
• Approaches to Positioning Strategy
Price
Technology

Quality

Approaches to
positioning strategy

Distributio Image Service

n
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 Thanks…

Any Query??

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