CHAPTER SIX

SEGMENTATION, TARGETING, AND POSITIONING

Segmentation:
Diverse Customer Base: B2B markets often consist of diverse businesses with unique needs and
preferences.
Tailored Marketing: Segmentation allows businesses to categorize clients based on industry, size,
location, or specific needs.
Customized Messaging: Enables the creation of targeted and personalized marketing messages for
different segments.
Resource Optimization: Helps allocate resources efficiently by focusing efforts on the most
lucrative segments.
Competitive Advantage: Businesses can gain a competitive edge by understanding and meeting
the distinct requirements of each segment.
Example: A company providing software solutions may segment its market based on industry
verticals (e.g., healthcare, finance, manufacturing) to create customized marketing campaigns
tailored to the unique challenges and needs of each industry.
Targeting:
Efficient Resource Allocation: Allows businesses to concentrate marketing efforts on specific
segments with the highest potential for conversion.
Increased Relevance: Targeting ensures that marketing messages are relevant and resonate with
the specific needs and pain points of the selected audience.
Maximized ROI: By focusing on the most promising prospects, businesses can achieve a higher
return on investment (ROI).
Establishing Expertise: Targeting specific segments positions a business as an expert in serving
the needs of those particular industries or businesses.
Building Relationships: Enables businesses to build strong and lasting relationships with a
concentrated set of clients.
Example: A business specializing in industrial machinery may target large manufacturing
companies with its marketing efforts, tailoring its messaging to highlight the efficiency, durability,
and cost-effectiveness of its machinery for large-scale manufacturing operations.
Consumer versus B2B segmentation
Consumer Segmentation:
Consumer segmentation involves dividing a market of potential customers into distinct groups
based on various characteristics such as demographics, psychographics, behavior, and preferences.
Demographic segmentation: Dividing consumers based on age, gender, income, education, etc.
(e.g., marketing toys to children and luxury cars to high-income individuals).
Psychographic segmentation: Grouping consumers based on lifestyle, values, attitudes, and
interests (e.g., targeting eco-conscious consumers with sustainable products).
Behavioral segmentation: Categorizing consumers based on their purchasing behavior, usage
patterns, and brand loyalty (e.g., rewarding frequent customers with loyalty programs).
B2B Segmentation:
Business-to-business (B2B) segmentation involves dividing the market of businesses into
segments based on characteristics such as industry, company size, purchasing behavior, and
decision-making processes.
Industry segmentation: Targeting businesses within specific industries, such as manufacturing,
healthcare, or technology, with industry-specific solutions.
Company size segmentation: Tailoring products or services for small businesses versus large
enterprises based on their unique needs and resources.
Purchasing behavior segmentation: Identifying businesses that are early adopters of technology
or those that prioritize cost-effectiveness.
Relationship between segmentation, targeting, and positioning
Segmentation:
Involves dividing the market into distinct groups of potential customers based on common
characteristics.
Targeting:
Refers to selecting specific segments from the overall market to focus on and direct marketing
efforts toward.
Positioning:
Involves creating a distinct image and perception of a product or brand in the minds of the target
audience.
Example:
Let’s consider a company that produces smartphones:
Segmentation: The company divides the market based on demographics, targeting young adults
who are tech-savvy and value stylish designs.
Targeting: Within the identified segment, the company focuses on a sub-group: urban
professionals aged 25-35 with high disposable income and a preference for the latest technology.
Positioning: The company positions its smartphones as cutting-edge, stylish devices that cater to
the needs and preferences of urban professionals, emphasizing features like advanced camera
technology and sleek design.
Effective segmentation
Effective segmentation refers to the process of dividing a market into distinct and meaningful
groups of customers with similar needs, characteristics, or behaviors. The goal is to identify
segments that allow a company to tailor its marketing efforts more precisely, ultimately improving
customer satisfaction and increasing overall business performance.
Example: A fitness company may use effective segmentation by categorizing its customers into
different segments based on their fitness goals, preferences, and demographics. For instance, they
might have segments for weight loss enthusiasts, muscle builders, and those focused on general
wellness. By tailoring marketing messages, products, and services to each segment, the company
can better meet the specific needs of its diverse customer base.
Characteristics of a good segment includes:
• Measurable
• Substantial
• Accessible
• Differentiable
• Stable
Competition
Competition refers to the rivalry or contest between businesses or firms within the same industry
or market. Companies compete for the attention, loyalty, and resources of customers. The level of
competition can vary, and it plays a crucial role in shaping a company's strategy, pricing, and
overall market position.
Example: In the smartphone industry, companies like Apple, Samsung, and Google compete for
market share. They strive to offer unique features, cutting-edge technology, and attractive pricing
to attract and retain customers. The intense competition in this industry leads to continuous
innovation and improvements in products and services to stay ahead in the market.
Segmentation variables
In business marketing, segmentation involves dividing a market into distinct groups of customers
with similar characteristics, needs, or behaviors. This allows businesses to tailor their marketing
strategies to specific segments, making their efforts more targeted and effective. Two main
categories of segmentation variables are Identifiers and Response Profiles.
Identifiers:
Demographic Variables: This segmentation is based on demographic characteristics such as age,
gender, income, education, marital status, and occupation.
For example, a company selling luxury watches might target individuals with a high income and
professional occupations.
Geographic Variables: Segmentation based on geographic factors like region, country, climate,
or population density. An ice cream company.
For instance, might adjust its product offerings based on regional climate differences.
Psychographic Variables: This involves dividing the market based on lifestyle, values, interests,
and personality traits.
For example, a fitness brand might target individuals with an active and health-conscious lifestyle.
Behavioral Variables: Segmentation based on customer behavior, including usage patterns, brand
loyalty, and benefits sought.
An airline might target business travelers who frequently fly and are likely to be loyal customers.
Response Profiles:
Usage Rate: Segmenting customers based on how often they use a product or service. For instance,
a telecommunications company might offer different plans for light users and heavy users of data
and minutes.
Brand Loyalty: Dividing customers based on their loyalty to a particular brand. A credit card
company might tailor promotions to retain and reward loyal customers with exclusive benefits.
Readiness to Buy: Segmenting based on the customer's readiness to make a purchase. For instance,
a real estate developer might target customers who are actively looking to buy a new home.
Sensitivity to Price: This involves segmenting customers based on their response to pricing
strategies. A budget airline might target price-sensitive customers with lower-cost flights.
Segmentation Process
In the B2B context, segmentation refers to the process of categorizing a business's target market
into distinct groups based on shared characteristics, such as industry, company size, or geographic
location. This strategic approach allows businesses to tailor their marketing efforts and offerings
to better meet the specific needs and preferences of each segment, ultimately optimizing resource
allocation and enhancing customer engagement.
The first and most obvious step in the segmentation process is to group companies by industry
classification. Industry classifications give a firm a start on the grouping of customers and
prospective customers into potential segments.
Using firm demographics also includes dividing customers into types – OEM, end user, and
aftermarket (MRO) – and grouping them by company size, geographic location, and by specific
financial factors such as credit worthiness.
Classifying customers according to OEM, end user, or aftermarket gives useful clues to their
commonalities. An OEM or original equipment manufacturer buys components, systems,
equipment, and materials. In the case of components, these enter the OEM’s final product while
materials are consumed in the manufacturing of their products. Systems and equipment are used
to make the products. OEMs often purchase many different items to develop a particular product
and frequently brand the product with their own name. Users obviously put the product to use.
For instance, John Deere tractors are used by farmers while Deere itself is an OEM.
The aftermarket, also called MRO (maintenance, repair, and operations), includes firms who offer
add-on products, repair services or replacement parts. Often, a producer may sell his product or
services to all three of these firm types, but each is a separate and different segment since
requirements will usually be quite different. For further detail (see Chapter 6, page 118, Table 6.4)
A second step involves more understanding of customer operations. In this step, the marketer
would determine what technologies potential customers are employing, whether they are heavy or
light users of the product to be offered, whether they purchase in a centralized or decentralized
way, and specifically what product requirements customers have, ranging from standard to custom
products.
A third step is to look at the purchasing situation – whether this purchase is a new task for this
firm, a straight rebuy or a modified rebuy, whether the potential customer has positive
Attitudes toward the firm, and what relationships have been established by the marketing firm with
potential customers.
A fourth step is to determine what commonalities there are among potential customers related to
the particular attributes of an offering firm. For instance, one customer group may be quite price
sensitive while another emphasizes delivery and a third demands product quality defined in some
specific manner.
For example, a firm supplying chemicals to an ink maker may find that color consistency is of
primary importance and far outweighs price or delivery as a purchasing attribute. Another aspect
of the vendor attribute would be the application in which the product may be used.
A more refined and more difficult set of variables to gain is customer variables. First and most
important would be the make-up of the Buying Center or DMU. Included here would be the
importance of this purchase to the firm, the corporate culture (including the attitude toward
innovation), and the attitude toward the product area.
A final (and most difficult) set of characteristics that may be used for segmentation are personal
characteristics of individuals in the DMU. These include national culture, age, experience and
education, loyalty to current vendor, and risk tolerance. A common saying in many firms is “no
one ever got fired for buying IBM.” Individuals with low-risk tolerance would tend to choose a
vendor like IBM since chances of negative consequences for an individual when choosing the pre-
eminent supplier in any market are far lower than if that individual had chosen a rather unknown
supplier.
Selecting the best segments
Demographic Segmentation:
Targeting businesses based on industry, company size, location, or revenue.
Firmographic Segmentation:
Focusing on companies with specific characteristics such as industry type, number of employees,
or annual revenue.
Geographic Segmentation:
Tailoring your offerings to businesses in specific regions or countries.
Behavioral Segmentation:
Targeting businesses based on their purchasing behavior, loyalty, or usage patterns.
Needs-Based Segmentation:
Identifying businesses with specific needs or challenges that your products or services can address.
Need to re-segment:
Market Changes:
If there is a shift in the market dynamics, such as emerging technologies or changes in customer
preferences, you may need to adjust your segmentation strategy.
Product or Service Expansion:
Introducing new products or services may require re-evaluating your target segments to ensure
they align with the updated offerings.
Competitive Landscape Changes:
If new competitors enter the market or existing ones change their strategies, you may need to re-
segment to maintain a competitive edge.
Global Segmentation:
Cultural Differences:
Adapting marketing messages to account for cultural nuances and preferences in different regions.
Regulatory Variances:
Considering and complying with different regulatory environments in various countries when
targeting businesses globally.
Language and Communication:
Tailoring communication and content to the language preferences of your target audience in
different regions.
Economic Variances:
Adjusting pricing strategies to account for variations in economic conditions across global
markets.
Global Supply Chain Considerations:
Adapting your segmentation based on the unique supply chain requirements or challenges in
different regions.

Market Targeting:
Market targeting involves selecting specific segments within the overall market that a business
aims to serve with its products or services. This involves identifying and evaluating different
segments based on factors such as industry, company size, geographic location, and specific needs.
Example: Consider a company that provides cloud-based project management software. Instead
of targeting the entire business market, the company might choose to focus on the technology
sector, specifically targeting mid-sized software development companies that have a need for
collaborative project management tools.
Positioning:
Positioning is the process of establishing a distinct image or identity for a product or service in the
minds of the target audience. It involves crafting a unique value proposition that sets the offering
apart from competitors and communicates the benefits to the target market.
Example: A B2B company manufacturing industrial machinery might position its products as
highly durable, energy-efficient, and customized to meet the unique needs of manufacturing plants.
This positioning strategy aims to differentiate the company from competitors that may focus on
different aspects of their offerings.
Re-positioning:
Re-positioning involves changing the way a product or service is perceived in the market. This can
be necessary in response to shifts in market conditions, changes in customer preferences, or to
address competitive challenges.
Example: Imagine a B2B company that initially positioned its accounting software as a
comprehensive solution for small businesses. However, due to increased competition and changing
market dynamics, the company has decided to re-position its product as a scalable and
customizable accounting solution suitable for both small and mid-sized enterprises. This shift in
positioning is aimed at expanding the company's market reach and addressing the evolving needs
of its customers.
To conclude, in B2B (Business-to-Business) marketing, segmentation, targeting, and positioning
are integral components of a strategic approach to reach and engage specific markets.
Segmentation involves dividing the overall market into distinct groups based on shared
characteristics such as industry, size, or geographic location. Targeting entails selecting the most
promising segments that align with the company's capabilities and objectives. Once the target
segments are identified, positioning comes into play, focusing on crafting a compelling and
differentiated value proposition that resonates with the specific needs and preferences of the
chosen segments. By effectively segmenting the market, targeting the right audiences, and
strategically positioning offerings, B2B marketers can optimize their marketing efforts to enhance
customer relevance and ultimately drive business success.