Industrial Market Segmentation

Industrial Market Segmentation

=
B2B Market Segmentation
Consumer Market Segmentation
=
B2C Market Segmentation

But we will continue on

B2B Market Segmentation
 How shall we proceed?
1. Segmentation Variables
for Business Markets 3. Steps in Segmentation Process
1. Demographic
2. Operating Variables 1) Needs-Based Segmentation
3. Purchasing Approaches 2) Segment Identification
4. Situational Factors 3) Segment Attractiveness
5. Personal Characteristics ▪ Porter’s Five Force Model
4) Segment Profitability
2. Effective Segmentation Criteria 5) Segment Positioning
1. Measurable 6) Segment “Acid Test”
2. Substantial 7) Marketing-Mix Strategy
3. Accessible
4. Differentiable
1. Segmentation Variables for Business
Markets
SAINT GOBAIN GLASSES
Tata Steel
[T]
 1) Demographic
 Industry: Which Industries should we serve?
S: Real Estate Industries. Companies like DLF, Lodha, Hiranandani etc. are
part of this industry.
T: Automobile, Aerospace, Rail and Other Manufacturing Industries.
Companies like Maruti, Godrej Interio

 Company Size: What size companies should we serve?

S: Medium to Large sized companies. From Divyasree to DLF
T: Medium to Large sized companies. From Godrej Interio to L&T

 Location: What geographical areas should we serve?

S: All areas in the world
T: South-East Asian, Indian, and European regions.
 2) Operating Variables
 Technology: What Customer Technologies should we focus
on? Durability, Tensile Strength, Smoothness
S:
T: Different grades of steel for different companies according to their
manufacturing requirements

 User / Non-User Status: Should we serve heavy users, medium users, light
users, or non users?
S: Focus more on Heavy users and cater to other users as well
T: Focus more on Heavy users and Medium users

 Customer Capabilities: Should we serve customers needing many or

few services?
S: Few Services.
 3) Purchasing Approaches
 Purchasing-functionorganization:Should we serve companies with a
highly centralized or decentralized purchasing organization?
S: Highly Centralized
T: Both, Highly Centralized and Decentralized

 Power Structure: Should we serve companies that are engineering

dominated, financially dominated, and so on?

S: - MIX
T – Engineering Dominated

 Nature of Existing Relationship: Should we serve companies with which we

have strong relationships or simply go after the most desirable companies?
S: Most Desirable companies / Both
T: Both
 3) Purchasing Approaches
 General Policies: Should we serve companies that
Purchasing prefer
leasing? Service contract? Systems purchases? Sealed bidding?
S: Leasing, System Purchases
T: Systems Purchase, Service Contract

 Purchasing Criteria: Should we serve companies that are seeking Quality?

Service? Price?
S: Quality. & Price
T: Depends company to company. Some might require Quality, some Service
while others Price.
 4) Situational Factors
 Urgency: Should we serve companies that need quick and sudden delivery
or service?
S: No
T: Can cater to Sudden Delivery demands if it has enough inventory in place.

 Specific Application: Should we focus on a certain application of

our
product rather than all applications?
S: All Applications
T: Certain Application or All Application, this doesn’t matter

 Size or Order: Should we focus on large or small

orders? S: All Orders
 5) Personal Characteristics
 Buyer-seller similarity: Should we serve companies whose peopleand
values are similar to ours?
S: ???
T: Not at all necessary because Tata it is a product based company and not
service based, hence the transactions with people will be lower in number

 Attitude towards risk: Should we serve risk-taking or risk-avoiding

customers?
S: Risk Taking
T: Both, Risk-Taking and Risk-Avoiding

 Loyalty: we serve companies that show high loyaltyto

Should suppliers? their
S: High Loyalty (Repeat orders)
T: Same for Tata Steel, High Loyalty
2. Effective Segmentation Criteria
 1) Measurable
The size, purchasing power, and characteristics of the segments
can be measured.

2) Substantial
The segments are large and profitable enough to serve. A segment should be the
largest possible homogenous group worth going after with a tailored marketing
program. It would not pay, for example, for an automobile manufacturer to
develop cars for people who are less than four feet tall.

3) Accessible
The segments can be effectively reached and served.
 4) Differentiable
• The segments are conceptually distinguishable and respond
differently to different marketing-mix elements and
programs.
• Example: Married and unmarried women respond differently to
different products such as dress materials, cosmetics,
households products, etc.

5) Actionable
• Effective programs can be formulated for attracting and
serving the segments.
• Example : Cigarette manufactures cannot promote their
product directly through the different medias such as
television, newspaper, internet, etc. therefore they have to
take different approach to promote their product.
3. Steps in Segmentation Process
 1) Needs-Based Segmentation
Group customers into segments based on similar needs and
benefits sought by customers in solving a particular consumption
problem.

2) Segment Identification
For each needs-based segment, determine which
demographics, lifestyles, and usage behaviors make the
segment distinct and identifiable.
 3) Segment
Attractiveness
Using predetermined
segment attractiveness
Threat of
criteria (such as market New
growth, competitive Entrants

intensity, and market

access), determine the
overall attractiveness of
Bargaining Bargaining
each segment. Power of
Competitive
Power of
Rivalry
Buyers Suppliers
Porter’s Five Force
model is the ideal
choice to determine the
market attractiveness Threat of
Substitutes
 4) Segment Profitability
Determine Segment profitability

5) Segment Positioning
For each segment, create a “value proposition” and product-price
positioning strategy based on that segment’s unique customer needs and
characteristics.

6) Segment “Acid Test”

Create “segment storyboard” to test the attractiveness of
each segment’s positioning strategy.
7) Marketing-Mix Strategy
Expand segment positioning strategy to include all aspects of the marketing
mix: product, price, promotion, and place.