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HOW TO SEGMENT

INDUSTRIAL MARKETS
PRESENTED BY: GROUP 1
UM14271, UM14272, UM14273, UM14274, UM14275, UM14276

INTRODUCTION ► Industrial Marketers use segmentation as a way to explain results rather than as a way to plan. ► Journal of Marketing Research’s Segmentation Research”. 1983. ► Mr. special August 1978 section “Market . Bonoma at HBS. ► Nested approach. ► Industrial Segmentation assist companies. Shapiro and Mr. ► Segmenting Industrial World .Not a cookbook.

INTRODUCTION   Why is Industrial Segmentation difficult? o Same industrial products have different applications o Different products can be used in same applications o Customers differ greatly. including how and why customers buy o Selection of key markets. Hard to discern which differences are important and which are trivial for developing a strategy How can industrial segmentation assist companies? o Analysis of the market. plans to profitably meet the needs of different market segments and to give the company a distinctive competitive advantage .better understanding of market place.rational choice of market segment that fits the company’s capabilities o Management of marketing.development of strategies.

NESTED APPROACH .

Customer Location: Example of heavy duty pumps . Company Size: Example of chemical supplier 3.g. Easily Observable characteristics  Broad Description of the company  Visiting the Customer is not required  Obtained from General Directories and Government Statistics 1. Industry: Marketers may wish to sub divide e.DEMOGRAPHICS  General. Financial Services 2.

the other goes for new customers.OPERATING VARIABLES These enable more precise identification of existing and potential customers within the demographic categories. Example of manufacturers who replace metal gears with nylon gears. Sometimes sellers use this strategy to identify competitor’s customers and try to lure them in case of a weak customer. Example of colour televisions. Example of Bethlehem Steel (state-of-art Burns Harbour plant in Chicago area).  Company Technology: determines a company’s buying needs. Japan. USAinvolves discrete components and manual assembly and fine tuning.  Product and Brand-Use Status: one of the easiest and obvious ways. one approaches existing customers.automated and use large integrated circuits. . Europe uses hybrid of integrated circuits and discrete components. and the third might target both.

an example of differentiation of customers by technical strength. Example.OPERATING VARIABLES  Customer Capabilities: companies with known strengths and weaknesses may be perceived as an attractive market. .technically weak companies in the chemical industry have traditionally depended on suppliers for formulation assistance and technical support and suppliers have used this to their advantage by identifying such customers Digital Equipment Corporation sold its minicomputers to customers able to develop their own software.

o Buyer Seller Relationships: Supplier has stronger ties with some sellers/customers as compared to others. . o Power Structure: Impact of influential organizational units varies and often affects purchasing function Example: GM has a very powerful financial unit hence making the purchase decisions extremely price oriented.  Factors that determine purchase approaches: o Purchasing function Organization: determines to some extent the size and purchase unit of company.PURCHASING APPROACHES  Most neglected yet most valuable approach in industrial market segmentation.

o Purchasing Criteria : All the above points make the purchasing criteria.PURCHASING APPROACHES o General Purchasing policies: Customers tend to do business or are interested in doing business with the companies or small firms that have established affirmative action purchasing programs. Benefit segmentation approach used Benefit segmentation is dividing your market based upon the perceived value. benefit or advantage consumers perceive that they receive from a product or service. .

SITUATIONAL FACTORS Situational Factors require a more detailed knowledge of the customers. They include the following: o Urgency of Order Fulfillment: routine replacements or emergency replacement Example: A chemical plant in need to replace a fitting quickly is often willing to pray a premium price for a vendor’s installation skills. for flexible manufacturing capacity that would be unnecessary with a routine replacements. . o Product Application: has major impact on purchase criteria and process and thus the choice of vendor. o Size of Order: An automated manufacturer will target that market which has a need for high volume whereas the non-automated company will want smallquantity and short-run items.

whereas Risk Receptive buyers look at number of buyers and tend to shop around.BUYERS’ PERSONAL CHARACTERISTICS  Markets in B2B can also be segmented based on individuals involved. It is considered worthwhile to develop a good and formal sales information system to ensure that salesperson transmit the data they gather to the marketing department.  Depends on:  o Personal style o Intolerance for ambiguity o Self confidence Data on personal characteristics often expensive and difficult to gather. This helps in formulation of strategies .  Risk Averse and Risk Receptive buyers  Risk averse are not good prospects for new products and concepts.