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An intra- and inter-organisational perspective on industrial segmentation
A segmentation classification framework
Ann H. Clarke and Per V. Freytag
Department of Entrepreneurship and Relationship Management, University of Southern Denmark, Kolding, Denmark
Abstract
Purpose – The purpose of this paper is to introduce and discuss a contextual framework, which is based on different purposes of segmentation. A matrix is proposed for segmentation that distinguishes between strategic and operational levels and the degree to which new value is created. Design/methodology/approach – The conceptual discussion aims at contributing to development of the discussion of segmentation purpose. Findings – Several models have emerged in the segmentation literature, but the purposes of many segmentation models are not explicitly addressed. However, the purpose of a model affects the segmentation process and has ramifications to the subsequent implementation. This paper links segmentation to the purpose of segmenting and discusses the degree to which previous choices have impact on a firm’s possibility to select and implement new segments. Research limitations/implications – This paper contributes to a more extensive discussion on segmentation. It adds to the discussion on segmentation purpose and implementation problems. Originality/value – The proposed matrix sheds new light on the importance of having a clear purpose with a model. Furthermore, it is shown that different purposes may have different ramifications to the firm and be more or less simple to implement, depending on the degree to which changes in the firms’ activities, actors and resources are needed. Likewise, changes in established relationships have to be implemented or new ones created. Keywords Market segmentation, Classification Paper type Conceptual paper

Intra- and interorganisational perspective 1023
Received March 2006 Revised January 2007 Accepted March 2007

Introduction ¨ Today segmentation is one of the core concepts in marketing (Sollner and Rese, 2001). It is important for successfully managing marketing strategies and programmes within industrial settings (Albert, 2003). Even though the importance of segmentation is well established there are still reports on gaps between theory and practice, which lead to implementation problems in segmentation (Dibb and Simkin, 2001; Kalafatis and Cheston, 1997; Sausen et al., 2005). On one hand, there seems to be problems with the segmentation methods and processes proposed in the literature, as these cannot be implemented in practice. The problems seem to be that practitioners have not moved away from very simple approaches, which can be handled as demonstrated by Abratt (1993). Further, theory offers a variety of approaches, which are quite advanced but difficult to handle in practice (Millier, 2000; Dibb and Simkin, 2001; Weinstein, 2004). In addition, the segmentation literature only to a certain extent considers what kind of

European Journal of Marketing Vol. 42 No. 9/10, 2008 pp. 1023-1038 q Emerald Group Publishing Limited 0309-0566 DOI 10.1108/03090560810891127

Theory does not properly consider the implementation of identified segments in the firm and the degree to which the firm is bound by previous choices. Different purposes raise different questions and result in different answers and decisions.9/10 1024 process should be applied in different situations. .. guiding sales. it is more or less implicit that segmentation is undertaken in order to reach different customer groups on a given market. which – if used correctly – may be very useful. resource ties and actor bonds in order to match the needs of the new segments as well as break old ˚ relations and build up new ones (Hakansson and Snehota. The classification makes it possible to distinguish how segmentation may be conducted depending on planning level and how fundamentally the offering is changed. That was the basic idea as formulated by Smith (1956). This relates to the problems caused if there is no distinction between segmentation for operational and strategic levels (Sausen et al. the case demonstrates how previous choices and relationships affect the implementation efficiency of selected segments in an organisation. stability.EJM 42. Challenges within segmentation In a large number of models from the segmentation literature. Furthermore. On basis of different purposes behind segmentation and differences in market offering a classification matrix is developed. Marketing has flourished with segmentation models. After this. 1994). Piercy and Morgan. in the conclusion. classified by the various purposes they may be used for: . . implications and need for further research are discussed. 2005. due to the contextual segmentation framework. limitations of. . A large number of different models have been developed. This relates to how well the firm actually manages to change its strategic intent. In particular. 1997) and the effect strategic and operational levels have on managers and their efforts to implement the segments. market communication. The task is to divide the market by identifying possible segmentation criteria and choose the most suitable segments with regard to size. What may have seemed pretty clear in 1956 has changed a lot since then. Finally. . 1985. The main idea behind this paper is to contribute to the understanding of segmentation by drawing attention to the importance of whether the segmentation is made for more strategic or operational purposes and to what extent the market offering is predefined. etc. positioning. can be understood. 1995). but they do not make the choice of an expedient segmentation model easy. The same goes for the consequences and subsequent decisions to be made. the extent and process of segmentation will differ. a case is used to illustrate how segmentation. activity links. pricing. . Depending on the purpose. it is discussed how market offering and segmentation are linked. How the segmentation should be conducted and implemented depends on the purpose of the segmentation (Plank. 1993. Wind and Thomas. growth. strategic planning. Jenkins and McDonald. being reachable. it does not thoroughly analyse in what situations the author’s proposed segmentation methods can be used. Further. Thus the paper starts by discussing different purposes for segmentation and the ramifications segmentation has to the organisation.

Here the question could be said to be. The defined market is the customer segments that are penetrated or could be penetrated. internal as well as external. development of existing customer potentials. Which segments to select is dependent on measurability. This raises the question of whether segmentation is a matter of fundamentally changing the idea behind the firm. (Jenkins and McDonald. can cause failure of implementation of the segments. (2005) the objectives of strategic market segmentation may be: . (2005) argue along the same lines and have developed a framework for strategic segmentation. 2003). it is more a matter of in what business the firm should be. exploitation of new customer potentials. 2004). as firms are bound by their previous choices. etc. defined and target markets. Already in 1985. The relevant market is the market. identification/exploitation of new submarkets. Plank pointed out that it is important to distinguish between strategically and operationally oriented models. The framework adds to the understanding of a market by distinguishing between relevant. Issues such as sales. Weinstein. Piercy and Morgan (1993) contributed by developing a framework in which they distinguish between the operational and the strategic level. and . . and adjusting the distribution system. .. which fits the resources and objectives of the organization in the environment. Wind and Cardozo. culture. . In mainstream marketing literature the perspective on segmentation is that the firm is free to make independent choices (Kotler. distribution. according to the Kotlerian view of the world. Based on an internal view of the market and potential segments management decides. The challenges involved in strategic and operational segmentations differ. this assumption can be dangerous to make. or whether it is rather a matter of adjusting to a changed market situation. According to Sausen et al. activities. can be defined as being at a more operational level. etc. which segments are to be targeted.and interorganisational perspective 1025 . whether a firm is highly path dependent or has the ability to make easy switches in its resource base. accessibility and actionability.. 2000. Implementation of segments depends on previously made choices The literature has also been criticized because it takes no account of the firm’s structure. Bonoma and Shapiro. 1997. Sausen et al. increase of customer profitability. On the strategic level. An attempt to implement a selection of new segments without understanding the firm’s current web of relations. often offerings are co-created (Dubois et al. improvement in targeting of marketing measures. 1984). 1974. However. profitability. Weinstein (2004) has introduced a strategic market definition framework. The target market contains the present market segment and targeting of the market. several studies have shown that firms do not necessarily exist in a reality. Intra. where the offering is decided by the seller alone. on the other hand. resources. . media. they are talking about fine-tuning the marketing-mix. In other words. Furthermore. product development and planning.

Moller (2006. As pointed out by Anderson et al.. To the business marketer. Webster. and taking into consideration the available ¨ alternative suppliers’ offerings in a specific-use situation”. 2003).. 1995). and it should also take into account that customers are able to make their own decisions (Freytag and Clarke. the firm is involved in different kinds of relationships with other actors. Thomas. The role of the firm is defined by what the buyer is looking for and what is offered by the provider (Anderson and Narus. 1982. but one that grows out of the search processes of both the buyer and the seller. At one point in time firms may be competing and at another point in time they may be cooperating. Coviello et al. Solving the problem of the ¨ customer is about offering value to the customer (Moller. The offer is valuated by its capabilities in problem-solving – it is not the drill that is interesting. Along the same lines Ulaga and Chacour (2001. Making priorities depends on what both parties want and the perception they have of each other. According to the concept introduced by Henneberg et al. (1994) the world of the business marketer is rather complex. In some situations.EJM 42. p. what value is created is not an isolated undertaking. but also by the buyer. the interaction process and the value creation process by stating that “the nature of value production forms a fundamental characteristic of any value production system and that the requirements of value production are related to the level or complexity of interaction between the supplier and the customer”. (2005) value can be divided into three levels: 1026 . 2004. the firm acts as seller and in other situations as a buyer. 1995. but the ability to make holes (Levitt. The roles of the firms are not given. but external concerns will also have an impact on the feasibility of solutions. pp. At the same time. The nature of the industrial market In business markets. who in some situations is a competitor. The choice of. 2001. Ulaga and Chacour. Value creation Kothari and Lackner (2006) make it clear that offering creation is not about developing products but about how the elements of an offering create value to customers. 2001). The degree to which the firm can make decisions will be affected by the web of customers. The relationships with the actors in the network may be more or less close ˚ ˚ (Hakansson. 530) have defined value as “customer-perceived value in industrial markets as the trade-off between the multiple benefits and sacrifices of a supplier’s offering. 2000). 2005). 2001). Hakansson and Snehota. Ulaga and Chacour. the firm should be aware of possible partners when segmenting the market. may thus be an undertaking not solely decided by the seller (Wilkinson et al. 1992. The interaction process defines both what value is created and how value ˚ ˚ is delivered (Hakansson. 1980) – and the other firm’s ability to deliver. 1982. who may buy from a seller. whom to work with and in what manner. Deciding which customers to work or not to work with and in what manner. as perceived by key decision makers in the customer’s organisation. is thus an undertaking not only involving internal considerations and limitations. 2006. Hakansson and Snehota.9/10 The purposes behind segmentation and the ramifications it has on the organisation are issues that will be further addressed in the classification. 1997. 915-16) has added to the understanding by emphasizing linkage between the production system.

In this relation. resource ties and activity links also mirrors sacrifices and benefits for the firms involved and the relationship. Actor bonds are the foundation for problem solving. which again will limit the firm’s possibility to freely select its customers. i. Firstly. Activity links provide the set-up with regard to how activities are coordinated between two firms. Intra. this may be very difficult due to commitments already made. 1995) offers a framework for analysing the different value dimensions experienced by the seller and the buyer in the relationship. both the seller and the buyer gain benefits and make ˚ sacrifices. When segmenting relationships it is important not to lose the focus on the individual relationship. In segmentation. logistics. in some situations. resources and actors . Values. adjustment of value offerings can be difficult to undertake and even more difficult to create. Therefore. 2001).e. resource ties and actor bonds has developed from the choices and experiences of the two firms working together in more or less close cooperation. resources and actors. and planning systems are working. actor bonds and activity links will be the outcome of the engagement (see Figure 1). Even when firms try to reposition themselves more on the market. the main idea is to classify customers in groups. which is conceived by the relationship – What value is created in the relationship? (3) Proprietary value ¼ value. secondly on the types of values (exchange. relational and proprietary value) the two firms will gain. The configuration of actor bonds. it depends on the strategic intent of the two firms. Relations have often been seen in the perspective of the individual buyer and seller. The degree to which the seller is able to fulfil the buyer’s needs will depend on the degree to which the seller is able to adapt resources. Only to a limited degree. how production. The ARA-model (Hakansson and Snehota. The degree to which the offerings should be individualised will depend on a number of factors. learning and social exchange between two firms. which is manufactured by the firm for its own benefit – What value is the seller getting? ARA-model and value In every market exchange. but a purpose-driven segmentation is a good lever (Freytag and Clarke. Resource ties describe how resources between two firms may be adapted. A firm entering into a relationship will experience that it has to develop more or less individualised offerings. will the seller have control over activities. and thirdly on which configuration of the resource ties. activities. the purpose behind segmentation will be to establish which value the customer wants and which solution the seller should provide. which is consumed by the buyer – What is the buyer getting? (2) Relational value ¼ value. This process is not simple.and interorganisational perspective 1027 Figure 1.(1) Exchange value ¼ value offering. The configuration of activity links. activities and actors.

These affected areas could be among the value-adding activities besides marketing and sales. The two levels can be closely integrated. for example if the purpose behind the segmentation is to reposition the firm on the market based on existing products and activities. production. These two dimensions form the basis for the later described contextual-segmentation matrix. File and Prince (1996) and Robertson and Barich (1992) this can also be seen as more operational in nature. At the operational level. but there can also be cases in which there may be little direct or mechanical connection between the two levels (Piercy and Morgan. i.EJM 42. 1997). and the organisation is only moderately involved and affected. activities. Plank. logistics and service. p. activities and resources.. “One outcome of micro segmentation is the ability to target communications to buyers with specific product or service offerings that they value and therefore are more apt to purchase from the seller. 281).” Others see the segmentation as particularly useful in personal selling. with strategic on one side and operational on the other.e. In this situation. The following section explains each dimension further.g. 1993. procurement. On one hand.. actors and offerings are combined. as the firm might have to acquire new actors. Strategic or operational Several authors have made a distinction between segmentation at a strategic or at an operational level (Goller et al.g. 1993). Examples of authors that focus more on the operational level are Albert (2003. The second dimension deals with the firm’s creation of new offerings on one level and adjusting existing offerings on the other. Piercy and Morgan. Thus segmentation can be seen as a creation of the organisation as much as a creation of the external environment (Jenkins and McDonald.9/10 1028 Description of the contextual segmentation matrix Based on previous research. 1997. propose changes in the offering. On the other hand. This application of customized or targeted communication strategies has often been cited as an industrial marketing strategy that should be more widely adopted. 1985. the consideration is on top management level and concerns the creation of missions and strategic intent and can become closely linked to the capabilities and nature of the organisation (Jenkins and McDonald. the . and many authors move into the operational area as well. when they. e. a larger part of the firm can be affected by the segmentation and selection of new segments by how the resources. there is a concern for planning and operational schemes for reaching target segments with an effectively adjusted offering as well as monitoring the performance. e. 2005). the impact on the selling organisation can be centred on marketing. two dimensions have been identified that are appropriate for dividing the segmentation activities. The first dimension relates to the level on which the segmentation implementation takes place. 2002. 1993) and might thus be difficult to implement as it will require changes within the organisation. Creating a new offering or adjusting an existing one The second dimension is the degree of changes the segmentation will have to the selling and buying organisations and the relationship. The general assumption behind the dimension is that there is a fundamental difference in how the firm is affected by the segmentation. Piercy and Morgan. product development. Sausen et al. At a strategic level.

and finally new relationships may have to be created.e. align the organisation with the market. As an example. the need to take customer reactions into account or even involving the customer may be low. and the firm has the task of offering customers the right products combined with the appropriate communication and distribution. when segmentation is discussed. In many articles on segmentation. implemented. it will to an extensive degree involve customers and established relationships. The situations are based on internal and external activities. e. The selling organisation should try to imagine what kind of effects the changed segmentation will have for buyers with regard to changes in sacrifices and benefits. resource ties.intent behind the segmentation could be to reposition the firm’s activities on the market or to select new markets. i. whether it is made for marketing existing products and/or the planning of future products. However. the product should be seen as a variable. resources. the main thing to do may only be to inform customers of the ongoing changes. How the product is viewed in relation to the segmentation should reflect the purpose of segmentation. This will affect how resources are used and may even require new resources. but it is taking effects on buyers and the commitments made in the relationships into account. But not only effects on the selling organisation should be taken into account in segmentation. Also new actors may have to be involved or recruited and activity structures changed. When only minor adjustments are made. actor bonds.and interorganisational perspective 1029 . creating different requirements. the actual segmentation and selection of segments is seen in relation to the marketing department and to a limited extent as an approach or activity that has an effect on the entire organisation.g. The matrix segmentation is still seen from the selling firm’s perspective. When the sole aim is to strengthen the market position. or whether it is a factor that can be affected. In particular this will have an effect on how implementation is conducted (see Figure 2). not as a given entity. The four situations differ with regard to segment. The fundamental task is to decide what customers the firm wants to serve. activity links. whether the product is given beforehand. according to Webster (1991). some may be changed more or less fundamentally. which market to be on is raised. it is often done with the existing organisation as a point of departure. Buyers will also be affected by changed segments. Thus. The market segmentation should be an important and active part of product planning strategies. On the other hand. Strategic level and creation of new offerings This section of the contextual segmentation matrix is intended to be used on a strategic level and in a context in which it is possible to affect creation of new value and customer portfolio. what to do and how the result will be utilized. when the question of. This is a situation that has a major Intra. The four situations in the contextual segmentation matrix The matrix below shows four situations characterized by different purposes for segmenting. etc. in industrial marketing strategy. actors and how value is created. Products are regarded as already developed. In marketing segmentation literature products are often viewed as given entities and not as variables. the second dimension can be seen in relation to. In this situation well-established relationships may be broken.

. who are we and what do we want? What customers to serve in what manner? Thus the firm will find it important to get insight into what type of offerings the portfolio should consist of. and as reported in many segmentation articles. internal decision processes and corporate culture will be affected. Mitchell and Wilson. which is in line with Piercy and Morgan (1993). obtaining new resources and including new actors in the selling firm. Over time. when the firm has no working experience in the market. However. Reasons for re-segmenting include: .g.EJM 42. e. laws and globalisation. In this kind of situation the firm will be open to such fundamental questions as. the risk of not succeeding is quite high. Such segmentation can take place when a firm starts. change in regulations. 1986. Contextual segmentation matrix (CSM) . it is difficult beforehand to answer all these questions. who make the point that the inner workings of the organisation in form of organisational structure. As example of a major challenge to a firm. 1998). information and reporting. In this situation. changed strategic objectives (buyer and/or seller). and . Information is primarily gathered with the overall identity and brand of the firm in mind and to a lesser degree does it comprise considerations that have direct implications for the way in which the market offer should be composed. In this situation. a firm will ask the same fundamental questions as when making a new start. It is a matter of developing concepts and ideas for a more concrete plan. new competitors or competitors that have changed strategic objectives. the firm might have to establish and destroy relationships. Figure 2. a new division is created. which includes creating new activities. and who will be willing to have relations. and how value should be created. it may become necessary to re-segment the market. new technology is taken into use. firms have problems implementing segments (Abratt. When re-segmenting the market. Hlavacek and Ames. which have been seen as important and this can create both internal and external resistance. it will mainly be a matter of establishing new relationships and trying to get a good picture of what customers could be interesting to relate to. This could also be the case for customers and the relationships with customers (Weinstein. That it is a major challenge to a firm. a firm chooses to offer an entirely new product category or new markets are created. it is important to have such insight. The reason could be that the firms do not fully understand the major implications of selecting new segments. It is a major challenge. new technology. 1993.9/10 1030 effect on the future of the firm. . 2004). in the relationship and/or the buying firm. Nevertheless.

The purpose could be to reposition the firm and its offerings in the mind of the customers. further research into the selected segments will be made. For some firms. The segmentation is made. Thus a central point in the segmentation can be expected to be specific customer needs. On the other hand. To sum it up. or some aspects of the offerings may be changed. At the same time.Operational level and creation of new offerings In this category of segmentation. in order for the offering to be specified and later serve as the foundation for decisions on how to target the market. Even if a good segmentation has been affected at the strategic level. By reconsidering the firm’s position on the market. which actors should be involved internally. e. with little or no involvement from other departments. as the implementation of the segments affects the rest of the organisation. but the segmentation should also create the foundation for specific marketing activity considerations. it is recommended to share information with other functions. The firm needs to look more critically at the way it has been positioning itself and the way it approaches its customers. segmentation is made on a basis where the organisational set up in the organisation is to some degree taken for granted. so that the organisational base connects to and assists the value creation better.g. extend the product line or undertake major updates of an existing product. In this situation. create a connection in its offerings or adjust the marketing activities. Strategic level with existing offerings The goal here is to segment for marketing. activities specified.g. this might involve changes in the exchange. This type of segmentation is desirable when a firm intends to develop a new offering. For example. for others it will be the central one. In relation to individual offerings. how customers act in relation to the same factors and how relationships should be developed for supporting the selected segments. This type of segmentation is often affected. the segmentation is made with a specific yet still future offering in mind. this will be a further segmentation. In such situations. position itself better or even go into new segments. The type of customers addressed may need to be Intra. segmentation could be considered a deepening of the previous segmentation. when a firm feels a need to more fundamentally evaluate the situation of the firm. e. offerings may be changed in the way they are communicated or distributed. it is very much a question of finding out how resources should be used. The segmentation is used to define the market for a new offering.and interorganisational perspective 1031 . primarily as a marketing activity. distribution or sales functions. distribution and sales at a strategic level. An important aspect of the segmentation is positioning and differentiation of offerings in the segments. relational and proprietary values. and how the changes are perceived by the customer. However. The perception of the repositioning is both a function of the intended repositioning by the seller. the firm will have to be aware that it might be less attractive to some customers and more attractive to others. it cannot be expected that the specification of the individual future offerings has been uncovered. This might lead to some adjustments of the internal organisation primarily in the marketing. it is clear that the task is to identify how the organisation can get a better grip of the situation by making some adjustments.

growing and promising for the firm. Actually the segmentation was not very useful for product development as it was not possible to clearly distinguish between different segments. relational and proprietary values. which was one of the leading users of applications at the time. In particular. In such a situation. the firm could develop and penetrate other segments with similar needs. the task is to operationalise the identified segments. The segmentation was based on a strategic level so that it could form the background for selecting future customers and planning future offerings. The firm has experienced a high degree of change in the technology it utilizes in its products as well as on the market. Based on a segmentation of the market. the firm chose to serve new customers and gave up some segments that had previously seemed large. This could relate to adjusting and planning the market offers. This might cause descriptions to be changed due to more valid information about the segments. cooperation forms) may have to be redesigned. and it will possibly lead to clearer. A concrete example could be making plans for the sales people of what to do within the different segments or in relation to a direct mail campaign. etc. This means that knowledge should be obtained by the actors involved in the external and internal relations and procedures should be developed. promotion. the seller and the buyers will learn about each others offerings and preferred values. new users and applications have continuously arrived and new demands that the products must meet have arisen. The firm operated in the food industry. rather than making changes. and less for planning and specifying future products. Operational level with existing offerings In the final category. The firm had experienced that the existing segmentation was more suitable for marketing and sales. logistics. On the market. the firm had developed its knowledge of customers’ application needs.9/10 changed and the market offerings (products. it is important to orchestrate the selling team as intended. the segments are fundamentally seen as given. Through close relationships with two major firms.EJM 42. A large Danish industrial firm develops and sells electronic equipment for manufacturing firms and OEMs.e. If the chosen segments are to work as anticipated. Over the years. but now it was obvious that their demands were far from those of other 1032 . Due to ongoing interaction. the price. but the challenge is to get as good descriptions of the segments as possible or a finer segmentation. the firm has developed a few other close relationships that have brought the firm into other industries. The firm started developing. and on basis of this specify segment dedicated products. richer and more useful descriptions. It is very much a matter of fine-tuning the exchange. i. In 2000. On the basis of this knowledge and built-up competences. the firm decided to make a new strategic segmentation in order to get a better match between the market and the needs for both marketing and the rest of the organisation. producing and selling its products in the mid 1960s. the focus is on implementing the segments found on the more strategic level. distribution. Exemplification based on a case The case below illustrates some of the issues above as well as it illustrates that it can be problematic for a firm to select and penetrate new strategic segments.

the firm did not have the necessary time or financial resources to develop the needed products. but based on resources and actor bonds. However. to a focus on developing the products in close cooperation with customers. However. The only situation in which it succeeds in refocusing.customers and the firm’s competences. the firm managed only partly to refocus the organisation and instead moved towards the strategic marketing-based cell and that repositioning required minor adjustments in existing resources. The firm created a completely new department to take care of development. One of the new segments was successfully introduced into the organisation. The firm had chosen to move into a segment that had needs related to segments the firm already handled with the existing product programme. Another important factor was that the firm did not manage to find customers with whom it could cooperate to develop the needed knowledge of customers’ applications needs. there is still a need for further development of the firm’s products. For several reasons a second segment was reintroduced. who continued being loyal to the firm and asked for further development of their products. is when it establishes the Intra. The case clearly shows that the firm is affected by its previous choices and the resources and competences that it has built over time. The selection of segments was approved and implemented by management and became fundamental to the firm’s strategy. a great part of the users in the segment had moved part of their production to Asia and there was an increased demand for the low performance products handled by the firm. However. The few close relationships that the firm has established are important to the knowledge of the industry and the firm has managed to use this knowledge to gain access to related segments. and it has proved difficult to fulfil these demands internally.and interorganisational perspective 1033 . the department was still not as successful as expected. six years later the firm had given up one of the new segments and reintroduced one of the old ones. The segmentation made was intended to be in cell 1. activities and actors. It was a segment that implied a completely new approach as it was developed in close cooperation with customers and was based on orders. Firstly. Secondly. Furthermore. activities and actors. marketing. the firm has to give up a selected segment as it has limited knowledge and cannot get the close relationship as leverage to the insight into the needs of the new selected segments. There are several reasons for this change and for what could be seen as a partly unsuccessful attempt to change focus. selected segment. the case also demonstrates that it can be difficult to break already established relationships. and could be a lever for penetrating the segment. in order for the firm to handle the applications needed in the segments. The customers had a good contact inside the firm as well. as the firm worked further with the segment. it realised that the products needed within the segment were different and raised demands to the firm for acquiring a new resource base. Based on the existing resource demands. it had acquired a firm that sold supplementary products. This raises demands for the firm’s resources. However. production and logistics focusing on this segment. However. as it was a major change for the firm to move from an approach in which it had an arm’s length relation to most of its customers. Thus the resources and competences acquired by the firm were still serviceable. new activities and new actors. the firm had developed relationships (not close) with several main actors in the industry. Furthermore. Finally the firm managed to implement and handle a new.

Following these lines the four different situations for segmenting were described and discussed.EJM 42. It is. which captures both value and relationship thinking. As Datta (1996) pointed out. which was useful for the firm to find out how much it takes to penetrate a new segment. it is possible to address the following three questions differently. however. In principle. the buyer and in the relationship? (2) Assessment of possible value creation and sacrifices made in future segments.9/10 1034 department where it develops customised components based on customers’ individual needs. Furthermore. The assessment of the selected segments should include consideration of the following questions as value is seen as an important building block for understanding the needs and wants of both the customer and the seller. the buying firm and in the relationship. is complex. it is possible for a firm to segment for the first time in all four situations. What value and sacrifices could be created for the seller. depending on the purpose and ramifications. On one hand it could be said that the company should have changed the organisation to be able to reach the intended aims of the strategic segmentation. presupposed that the firm operates in a market that . activities and actors and the customer relations needed. should no longer be a matter of interest to marketing analysts alone. A final reason for the lack of implementation was that the new segmentation structure had to compete with the old structure in the marketing department and the existing structure in the organisation. to obtain the value aimed at and what will the sacrifices be? Yet another issue is the order in which a firm will affect segmentation. On the other hand it may be a process. Conclusion Although building a matrix for segmentation. The need to segment may occur for different reasons as described in relation to the contextual segmentation matrix. It should be a central concern of top management and strategic planners as well. it contains a fruitful understanding of how firms could work on a solid foundation. or how it can potentially be segmented. changes in established relationships have to take place or new ones have to be created. it was shown that different purposes may have different ramifications to the firm and be more or less easy to implement depending on the degree to which the changes in the firms’ activities. What value and sacrifices are created today for the seller. Likewise. which may give fewer problems with implementing the selected segments. as described in relation to the contextual segmentation matrix: (1) Assessment of the value created and sacrifices made within the present segments. actors and resources are needed. the matrix helps to address segmentation more adequately by making the purpose and ramifications of segmentation clearer. a good understanding of how a market is. the buyer and in the relationship? (3) What changes in the value creation and sacrifices made are necessary to penetrate and handle the future segments? What changes should be undertaken in the selling firm. The matrix has made a distinction between the strategic and operational levels and the degree to which new value is created and has shed new light upon the importance of having a clear purpose behind a model. From a managerial point of view. In line with this. Here the firm succeeds in creating the new resources.

Resources often have to be obtained. 1997) or the buyer (Bensaou. offerings developed and relationships established. which may cause difficulties in making the found segment work. but not necessarily to let the customer participate in the actual segmentation of the market. activities and actors in and between firms. the degree to which the firm can make independent strategic decisions. the point of view behind the matrix is still an inside-out-perspective. The fifth point relates to the question of. the seller and buyer may have different views on the each others importance. Third. and sellers do not always know how their offerings will be taken into use. but it makes the seller think about. A more radical approach is to let the customer participate Intra. i. By shifting perspective and dealing with relationships. Overall. where strategies emerge in the interaction between firms. There seems to be no easy answers to this. It is not only a matter of choosing and being chosen. but they will often develop over time due to the nature of resources. In this perspective. At a later point in time. One type of relationship-based segmentation could be to segment in order to find customers that would be interested in having close relationships. relational and proprietary) offers a fruitful way to address this issue. how many other firms is it possible and expedient to have close relationships with? Fourth. the matrix is interesting as it brings attention to six important issues which have not been researched in depth until now. This can be a time-consuming process as firms do not always know from the beginning what their needs are. In other words.and interorganisational perspective 1035 . If the market is under creation. Sellers’ and buyers’ choices will be made based on both earlier commitments and potential future value and sacrifices. Due to resource constraints and strategic intent.g. segmentation will be a matter of more or less deliberately made choices both in the selling and buying firms. learning and decentralised control.e. First. Thus firms may have to re-segment at a later point in time to get a better understanding of the segments they are handling. in some instances. After making the decision of what market to be in. the starting point will usually be what market to be in. the question is also. It has been the premises in marketing that the seller can define the use and the content of the marketing mix. whether it is possible to talk about relationship management or not. how the buyer may evaluate and decide. the firm could find it necessary to more fundamentally reconsider the market segmentation or alternatively fine-tune its market position. 1999).is already developed. buyers will differ according to how close they want to get to the seller and visa versa. From a theoretical point of view. but also for what purpose! In extension of this. E. the developed matrix pinpoints these three issues by not leaving a fourth issue out: the dyadic nature of business markets. Second. many of the contributions in portfolio management have either exclusively had the perspective of the seller (Turnbull and Zolkiewski. Wilkinson (2006) has indicated that strategising may be more about adaptation. Not many contributions have shown how mutual relationship management can be undertaken. the question of mutual or independent strategising becomes an issue. segments are not just penetrated overnight. segments may have emerged over time due to learning effects both by the selling and buying firms. the next step should be for the firm to decide how it wants to address the market. Differentiating between the three types of values (exchange. Strategizing becomes a matter of taking the mutuality of decision-making into consideration. markets are not given identities as it is presupposed by marketing literature.

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