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1
“In business-to-business marketing,
segments are clusters of firms that are
distinct from others in terms of what
they need and buy as well as how they
buy.”

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“Producing an offering that meets the
needs of customers in the segment
better than the competitor’s, and
reach segment through
communication and distribution
channels so that customers realize
the superior value offered.”

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Marketers choose segments to target by:
 Measurability
 Accessibility
 Substantiality
 Actionability

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“An effective segment has members
that are homogeneous within the
segment and those members as
heterogeneous as possible with the
members of other segments.”

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 Relationship of product and marketing
activities
 In comparison to other segments,
participants must demonstrate
superior value to consumers
 Positioning is in the mind of consumer
 Resources are often managed to
ensure successful positioning

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 Competitive advantage through low
cost position
 Competitive advantage through
differentiated offering
 Competitive advantage through
providing an exact product to a niche
market

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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 8
 Value Chain Offering Segment

Value Enabling Value Creating a 1

– Infrastructure – Input a
bb 2 Subgroups
– People Logistics
with
Management – Operations cc
3 differing
dd
– Technology – Delivery needs
Development Logistics 4
& Mgt – Marketing
– Resource – Service Several sub-
Acquisition
groups in the
Key elements of value chain Key elements of offering market segment
contributing to offering – addressing subgroups in due to differing
complicated chain of activities the segment – needs
due to complicated offering complex offering
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 Value Chain Offering Segment

Value Enabling Value Creating

– Infrastructure – Input a
Logistics a 1
– People
Management – Operations bb
– Technology – Delivery
Development Logistics 2
& Mgt – Marketing Fewer sub-
– Resource – Service groups in the
Acquisition market
Key elements of value chain Fewer key elements of segment due
contributing to offering – offering addressing to more
simpler chain of activities subgroups in the homogeneous
due to simpler offering segment needs
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Produces two sets of data:
 Determine relative size and growth
potential of segments
 Determine individual segment needs
and buying behavior

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Industry classifications designed and
used by the U.S. government, Canada
and Mexico.

Visit: http://www.census.gov/naics/ for

full description.

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 11 Agriculture, Forestry, Fishing 53 Real Estate and Rental and Leasing
and Hunting
21 Mining, Quarrying, and Oil 54 Professional, Scientific, and
and Gas Extraction Technical Services
22 Utilities 55 Management of Companies and
Enterprises
23 Construction 56 Administrative and Support and
Waste Management and
Remediation Services
31-3 Manufacturing 61 Educational Services
3
42 Wholesale Trade 62 Health Care and Social Assistance
44-4 Retail Trade 71 Arts, Entertainment, and
5 Recreation
48-4 Transportation and 72 Accommodation and Food Services
9 Warehousing
51 Information 81 Other Services (except Public
Administration)
52 Finance and Insurance 92 Public Administration
Source: www.census.gov/eos/www/naics/index.html

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 Look for new customers
 Verify existence of segment
o Do so by transferring technology offering
of the first customer to other customers
 Involves exploratory interaction with
current and prospective customers

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 Setting Goals
o Achieving sales level, growing at a
desirable rate, and other tangible goals
 Defining Segments
o Measures that reflect differences in need

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 Attributes Segments
Segment 1: Segment 2: Segment 3: Segment 4:
Scores on 5-point Major Stopping Competitive Specific Area
scale* Turnaround Deterioration Improvement Improvement

Potential size year 2 3 4 4

2010 (in $million) $195.0 $390.0 $585.0 $975.0
Growth, percent 4 4 1 5
increase by 2012 100% 100% 50% 150%
Need strength 3.5
5 4 3.5
(High variance)
Competitive strength 3
3 3 4
(High variance)
Channel reach 5 5 5 5
Communications reach 4 4 4 4
Capability fit 2 5 5 2
Price sensitivity 2 3 4 3

Overall attractiveness
(sum of attribute 27 31 30.5 29.5
scores)
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 Conservatives
Pragmatists
Sales from New
Adopters/period

Visionaries

Laggards

Technophiles
Time

Also shown as Exhibit 2-6

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18
 Technophiles—try out the latest and greatest
technology; do not need fully developed offering
 Visionaries—see competitive advantage by using
technology; standardized buying with custom
offering
 Pragmatists—want same as visionaries but will not
buy unless technology is easily adopted with minimal
difficulty
 Conservatives—only buy when it doesn’t cost to
adopt; need to be convinced that the offering is
exact for needs
 Laggards—will avoid adoption of technology at all
costs

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 Technophiles—needs are curiosity; target early
 Visionaries—gain competitive edge and will pay
for it; target for support
 Pragmatists—keep up with cutting edge; use
innovation translation
 Conservatives—need new technology to keep up
to standards
 Laggards—unique needs met by old technology

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 Goal is to get members of the different
segments to see and value both the
differences and similarities
 Relate to the overall corporate brand
positioning
 A flagship product may be desired
 Position consistent with McKenna’s idea
of market ownership

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