Business to Business Market Segmentation Procedure

There is no right way to do segmentation. The key issue is to better understand your current markets and to identify new market segments that can be successfully and profitably exploited.

Presented By Group-7 Amrendra Kumar(26NMP09) Md.Azadur Ra man Mo!!ick(26nm"#$) Sam%ukt Prakas Agra&a!(26NMP'#) (i)ekanand(26NMP'*)

As "er Kot!er Market segmentation as a t ree+ste" "rocess t at $. Starts ,% identi-%ing distinct grou"s o- consumers & o a)e di--erent needs and &ants. 2. / en se!ecting one or more market segments to target. #. 0ast!% communicating t e ,ene-its o- t e com"an%1s o--ering to eac target market Muc o- t e industria! market segmentation !iterature -ocuses on t e -irst ste" o- identi-%ing t e distinct grou"s o- ,u%ers and t e ,ases. As "er 2!o% and Akridge ($999) / e% identi-ied -our market segments3 Ba!ance. Price. Per-ormance. and 4on)enience. Ba!ance and Per-ormance segments are Business ,u%ers. Price segment are 5conomic ,u%ers and 4on)enience segment are Re!ations i" ,u%ers.

Ba!ance. Price. 4on)enience. and Per-ormance segments attitudes to&ard in-ormation. t eir decision making "rocesses and in-!uences. -actors t at a--ect t eir !o%a!t% and t eir "ers"ecti)es a,out !oca! dea!ers and manu-acturers. 6i)iding t e market+"!ace ,ased on t e -our segments &i!! e!" marketers use t eir resources to rein-orce as"ects o- t e )a!ue ,und!e t at are most meaning-u! to t e segments t e% c oose to target. The Charlestown Chemical case balance, performance and convenience help Puritan to have competitive advantage over others. As "er Rogers. $9768 )on 9i""e! ($9**) Segmentation in t e area o- "roduct "!anning in ,usiness markets :denti-% organizations t at are t e most !ike!% to e)a!uate and tr% ne& o--erings3 t e inno)ator and ear!% ado"ter segments o- a market. Stud% "ast "urc ase ,e a)ior3 "re)ious ear!% ado"ters o- ne& "roducts are !ike!% to ,e ear!% ado"ters o- simi!ar "roducts in t e -uture.

n case of !orthern Chemical Company targeting to enter with new product and in new mar"et would help such segmentation.

As "er ;ind and 4ardoza ($97') ;9<= :ndustr% t%"e. size o- com"an% (sma!!. medium. !arge8 ,ased on re)enues or amount oem"!o%ees). geogra" ic !ocation. tec no!ogica! ,ase. user status (nonuser. !ig t user. moderate user. ea)% user) ;9A/= 5nd+use a""!ication. )o!ume used. "rice "aid. "roduct s"eci-ication ;9>= Purc asing "o!ic%. ,u%er?se!!er re!ations i". ,u%er "ersona!it%. ,ene-its soug t

#s per our understanding $%&'& (geographic) and *uantity (purchasing behavior based product usage) also need to be ta"en care of while doing segmentation As "er @rank ($972) and RaaiA and (er a!!en($99') 6i--erentiation o- segment -rom ot ers on t e ,asis o Measura,i!it% 3 size and ot er c aracteristics o- t e segments can ,e measured) 9omogeneit%3 segmentation) )ariation. sta,i!it% (t e segments are sta,!e enoug -or a !ong+run

Bse-u!ness3 accessi,i!it% (t e segments can ,e e--ecti)e!% reac ed and ser)ed) Su,stantia!it%3 segments are ,ig and "ro-ita,!e enoug to ser)e Strategic criteria3 "otentia! (t e segments "ro-ita,i!it% -or t e com"an%) a)e "otentia! in -uture de)e!o"ment and

Attracti)eness3 t e segments are attracti)e enoug -or "otentia! customers and are &ort t e com"an%1s e--ort

Strategic segmentation "rocedure to identi-% "otentia! ear!% ado"ters o- ne& tec no!ogies. Num,er o- stages or !e)e!s in t e segmentation "rocedure &i!! de"end u"on t e "ur"ose -or & ic t e resu!ts &i!! ,e used. and t e a)ai!a,i!it% o- suita,!e data &it & ic to segment markets. Sing!e stage "rocedures3 t e -irmCs ,u%ing decision t%"o!og% (Ro,inson. @aris and ;ind. $967). in-ormation "rocessing strategies (@e!dman and 4ardozo. $967). customersC "erce"tion o- )a!ue and ,ene-its (>anke!o)ic . $96'). "urc asing agenda decision st%!es (;i!son. Matt e&s and S&eene%. $97$). #s in sealed air corporation case the &uropean mar"et and +, mar"et customer perception of value and decision styles help the company to ta"e valuable decision. /&o stage "rocedure3

Macro segmentation3 t e -irst stage. centers on t e c aracteristics o- t e ,u%ing organization suc as size. !ocation. industr%. and end+use markets. Micro segmentation 3 t e second stage. -ocuses on t e c aracteristics o- decision making units &it in eac macro segment. e.g.. indi)idua! c aracteristics o- ,u%ers. decision criteria. t%"e o"urc ase situation. and "ercei)ed im"ortance o- t e "urc ase

@or eDam"!e3 4or"orate strateg% -ormu!ation !e)e!3 "roduction tec no!og% and t%"e o- "roduct o--ering are made + one or t&o stage segmentation "rocedure s ou!d ,e su--icient. ndustrial chemical nc and standard machine corporation case best suited for two stage segmentation as for micro and macro level strategy of buyers. / ree stage "rocedure3 @or eDam"!e3 Marketing "rogram !e)e!3 need more t an t&o stage. customer res"onse to marketing miD )aria,!es is crucia! and detai!ed in-ormation on target segments is necessar%. -urt er stages ma% -ocus on customized marketing #s in case of ,ignode industries case need more detailed information on target segment with customi-ed mar"eting for pricing strategy. As "er ;ende!! Smit ($9E0) Product 6i--erentiation and Market segmentation as A!ternati)e Marketing Strategies Bot di--erences eDist in t e "roduct o- an industr% and t at t e% t ere-ore resu!t into se!!ers1 marketing decisions. 6i)ision o- a market into grou"s o- customers & o s are certain c aracteristics or interest in a certain "roduct or ser)ice mig t ,e an e--ecti)e and use-u! &a% -or an organization to manage di)ersit% &it in a market /rue segmentation is a,out identi-%ing t e reFuirements and ,e a)ior o- segments and matc ing marketing o--erings &it consumer ,e a)ior.

As "er 4 o--ra% and 0i!ien ($9*0) . Se!ection o- di--erent sets o- )aria,!es to segment and t en descri,e markets / e segmentation )aria,!es a!so e!" to identi-% target markets and de)e!o" marketing strateg%. A!so. t e segments -ormed must eD i,it )ar%ing "ro"ensit% to ,u% a se!!erCs "roduct or ser)ice o--ering. / us customer ,ene-its or needs -orm t e most !ogica! segmentation ,ases. 6i--erentiated marketing strateg% de"ends u"on t e a,i!it% o- t e -irm to reac its target markets

4ustomer needs can ,e c!assi-ied into a) ,ene-its soug t and ,) So!utions to "ro,!ems. @urt er su,di)ided using a -unctiona! or a "s%c o!ogica! dimension.

Needs+,ased segments in a t%"ica! ,usiness+to ,usiness market o-ten resem,!e t e -o!!o&ing A "rice+-ocused segment3 4om"anies in t is segment are o-ten small, wor"ing to low margins andG regard t e "roduct?ser)ice in Fuestion as o- !o& strategic im"ortance to t eir ,usiness. A Fua!it% and ,rand3 -ocused segment. & ic &ants t e best possible product and is prepared to pay for it. 4om"anies in t is segment o-ten &ork to high margins, are medium-si-ed or large, and regard t e "roduct?ser)ice as o- ig strategic im"ortance.

A ser)ice+-ocused segment3 as ig reFuirements in terms o- product .uality and range, ,ut a!so in terms of after sales, delivery. etc. / ese com"anies tend to &ork in time+critica! industries and can ,e sma!!. medium or !arge. / e% are usua!!% "urc asing re!ati)e!% ig )o!umes. A "artners i"+-ocused segment. usua!!% consisting o- ke% accounts. & ic seeks trust and re!ia,i!it% and regards t e su""!ier as a strategic "artner. Suc com"anies tend to ,e !arge. o"erate on re!ati)e!% ig margins. and regard t e "roduct or ser)ice in Fuestion as strategica!!% im"ortant.

Segmentation is essentia!+ Ht e act o- di)iding a market into distinct grou"s o- ,u%ers & o mig t reFuire se"arate "roducts and?or marketing miDesH. Market segmentation is a )ita! e!ement in market strateg% de)e!o"ment as it ena,!es marketers to target t eir o--erings to meet t e di)ersit% o- customer needs most e--icient!%. / e c oice otarget segments a!so se!ects t e -irmCs com"etitors. /o reiterate. segmentation. !ike marketing itse!-. is a!! a,out t e "ro-ita,!e satis-action ocustomers1 needs. :t is designed to ,e a "ractica! too!. ,a!ancing idea!ism against "ractica!it% and coming u" &it a so!ution t at maDimises "ro-it. ;e a)e to c oose our target audience on t e ,asis o- our ca"a,i!ities and strengt s. :n ot er &ords &e a)e to c oose our o&n ,att!e-ie!d & ere &e are con-ident t at &e are more attracti)e t an our com"etitors.

Ke% 4 a!!enges / e main di--erences ,et&een consumer and ,usiness+to+,usiness markets. and set out t e im"!ications -or segmentation3 $) B2B markets a)e a more com"!eD decision+making unit as eac o- t ese "artici"ants a)ing t eir o&n set o- (not a!&a%s e)ident) "riorities. 2) :n ,2, markets mar"eting, production, procurement, all the concerned departments are involved in ma"ing a decision. #) B2B ,u%ers are more Irationa!1 , t e% tend to ,u% & at t e% &ant8 ,2, ,u%ers genera!!% ,u% & at t e% need. ') B/B products are often more comple01 e)en t e sim"!est o- ,2, "roducts mig t a)e to ,e integrated into a !arger s%stem. making t e in)o!)ement o- a Fua!i-ied eD"ert necessar%. ; ereas consumer "roducts are usua!!% standardized. ,2, "urc ases are -reFuent!% tai!ored.

E) B2B target audiences are sma!!er than consumer target audience 6) Persona! re!ations i"s are more im"ortant in b/b mar"ets1 A sma!! customer ,ase t at ,u%s regu!ar!% -rom t e ,usiness+to+,usiness su""!ier is re!ati)e!% eas% to ta!k to. Sa!es and tec nica! re"resentati)es )isit t e customers. 7) B2B ,u%ers are !onger+term ,u%ers1 Businesses1 re"eat "urc ases (mac ine "arts. o--ice consuma,!es. -or eDam"!e) &i!! a!so reFuire ongoing eD"ertise and ser)ices in terms o- de!i)er%. im"!ementation? insta!!ation ad)ice. etc t at are !ess !ike!% to ,e demanded ,% consumers. *) B2B markets dri)e inno)ation !ess t an consumer markets 1 B2B com"anies t at inno)ate usua!!% do so as a res"onse to an inno)ation t at as a""ened -urt er u"stream. :n contrast &it @M42 com"anies. t e% a)e t e com"arati)e !uDur% o- res"onding to trends rat er t an a)ing to "redict or e)en dri)e t em. :n ot er &ords. B2B com"anies a)e t e time to continua!!% re+ e)a!uate t eir segments. Some "ractica! errors &e -ound in doing Market Researc (An im"ortant too! -or Market Segmentation) Market researc in :ndia is a mono"o!istic ,usiness. &it eac sector most!% a)ing one. occasiona!!% t&o. "!a%ers -or eDam"!e. t ereCs Nie!sen in @M42. 2-K in consumer dura,!es. :64 and 2-K in mo,i!e " ones. and 2artner and :64 in com"uters. to name a -e& sectors. Nie!sen ta,u!ates num,ers -rom $6.700 out!ets to ca!cu!ate @M42 market s ares across an estimated *.' mi!!ion out!ets in :ndia. / e set consists !arge!% o- kirana s o"s. and not enoug modern retai! stores. c emist s o"s. arm% canteens. tea s o"s. and ig &a% and rura! out!ets. 02 recounts a recent 2-K+Nie!sen re"ort t at s o&ed 02Cs s are o- 046 /( sa!es in (iAa%&ada to&n as zero and t e com"an% ad to s o& in)oices to t e agenc%. Sam"!e size &as )er% sma!! "eriod

RaAee) Kar&a!. -ounder o- SM5 consu!tanc% Mi!agro& and a dura,!es industr% )eteran. "oints out t at ,et&een Marc and Ju!% man% dea!ers outside t e regu!ar dura,!es net&ork stock u" on re-rigerators to cas in on t e seasona! s"ike in demand.

H:- 2-K+Nie!sen does not do an eD"ansion o- its enumeration eDercise in t e season. itCs ,ound to miss out on t is c ange. @or ana!%zing market data -or segmentation it1s rea!!% im"ortant to c eck its )a!idit% as"ect.

Conclusion we draw: / ere is no Krig t &a%L to do segmentation. / e ke% issue is to ,etter understand %our current markets and to identi-% ne& market segments t at can ,e success-u!!% and "ro-ita,!% eD"!oited. / e -i)e ,2, segmentation dimensions are as -o!!o&s3 2eogra" ic. @irmogra" ics. Product Bsage. Bene-its 6esired. and Purc ase Be a)ior. 5ac dimension ans&ers a di--erent Fuestion a,out %our market and target audience. 5Dtensi)e !ist o- ,2, segmentation dimensions and )aria,!es is added as AnneDure ::. @ina!!%. it is im"ortant to sa% t at t e se!ection o- segmentation )aria,!es must ,e )a!idated ,% %our o,ser)ation o- %our market and target audience. As "er our understanding and a,o)e discussion Segment s ou!d ,e ,ased t ese criteria1s3 $. ,egments should be need based. Procedure s ou!d ,e a,!e to s"!it a market into natura!!% occurring need segments / ese segments ma% t en ,e targeted &it segment+s"eci-ic marketing strategies (6ickson and 2inter. $9*78 ;ind and 4ardozo. $97'). <ur -ocus on needs rat er t an c aracteristics o- t e ,u%ing grou" "articu!ar!% in ,usiness markets. needs are t e "rimar% determinants o- "urc ase ,e a)ior 2. ,egments should be robust and generalisable Accurate and re!ia,!e market data s ou!d ,e used and a""ro"riate statistica! tec niFues em"!o%ed to -orm t e segments (;ind. $97*). As a!so discussed some "ractica! errors &e -ound in doing Market Researc /o "ermit genera!isation. t e sam"!e s ou!d ,e re"resentati)e o- t e tota! market and tec niFue used -or data ana!%sis. #. ,egments should be testable for time dependence. Needs+,ased segments a!!o& assessment o- segment sta,i!it% o)er time ,% detecting s i-ts in segment "re-erences. and customer s&itc ing ,et&een segments. '. ,egments should be identifiable. As discussed ear!ier / e success o- a di--erentiated marketing strateg% de"ends u"on t e a,i!it% o- t e -m to reac its target markets ((4 o--ra% and 0i!ien. $9*0)

E. ;e "ro"ose detai! market Segmentation "rocess as recommended ,% 2ra ame R. 6o&!ing. 2ar% 0. 0i!ien and Pra)een K. Soni in AnneDure : Bene-its o- ,usiness to ,usiness market segmentation $. 9e!" in ac ie)ing a ,etter "osition on t e market and reducing retention o- customers 2. 9e!" in communicating correct!% &it t e com"an%1s target sectors #. 9e!" in communicating "roduct?ser)ice and its )a!ue to t e customers '. A com"etiti)e strategic "osition in a s"eci-ic area o- market and e!" in "!anning -uture gro&t and de)e!o"ment o- t e com"an%. / ese ,ene-its "!a% a ,ig ro!e in com"anies1 management "rocesses and im"ro)e communications &it customers and "roduct1s "ositioning. se!!ing as &e!! as com"anies "!anning strategies

AnneDure :

Pro"osed Market Segmentation Process

,tage 21 3efine nformation !eeds for !ew Product ,trategy 3evelopment ,tage 41 5#C'6 ,&G5&!T#T 6! $.$3 <,tain?5ngage a sam"!e Hre"resentati)eH o- t e market $.23 4o!!ect data on insta!!ed eFui"ment?"urc ases?needs $.#3 Segment market on t e ,asis o- indicators o- ,road ,ase needs. )iz. -irm size. industr% t%"e $.'3 (a!idate Macro segments Macro segment $ Macro segment 2 Macro segment # ,tage /1 5 C'6,&G5&!T#T 6! #!3 7#8 3#T 6! 2.$3 4!uster ana!%se -irms &it in eac macro segment on t e ,asis o- !e)e! o- ado"tion o- )arious "roducts (i.e. re)ea!ed needs) ,tage 91 3&,C' B& 5 C'6,&G5&!T, #!3 8 !: T6 ,T'#T&G; #.$3 6isa,!e segmentsC demogra" ic c aracteristics. "urc asing ,e a)ior. etc. #.23 Bse resu!ts to suggest ne& "roduct strateg% ,tage <1 'edo=test for segment stability over time

AnneDure ::
K25<2RAP9:4SL M S52M5N/A/:<N 6:M5NS:<N ANS;5RS K;95R5L NB5S/:<N

MARK T !"#$ % describes the geographic scope of your market 20<BA0 ;or!d&ide Nort America 5uro"e Asia 0atin America Se!ected 4ountries NA/:<NA0 Aggregation o- States R52:<NA0 Ne& 5ng!and P!ains States Sout eastern States ;estern States 0<4A0 Oi" 4ode MSA 4ount% 4it% 4B0/BRA0 5Dam"!e @renc S"eaking 4anadians 2<(5RNM5N/ 4it% 4ount% State BRBAN:4:/> Br,an Su,ur,an Rura! /RA65 AR5A Primar% Secondar% /ertiar% Margina! 40:MA/5 4!imate Oones K@:RM<2RAP9:4SL S52M5N/A/:<N 6:M5NS:<N M ANS;5RS K;9<L NB5S/:<N

A25 >ears in Business S:O5 Num,er o- em"!o%ees Num,er o- 0ocations Num,er o- P!ants @:NAN4:A0 Sa!es Pro-its 4redit Rating 654:S:<NS 9eadFuarter ? Su,sidiar% Branc :N6BS/R> S:4 4ode NA:4S 4ode NA45 (5B) :S:4 M :nternationa! <;N5RS9:P Pu,!ic 4om"an% Pri)ate 4om"an% 2o)ernment NonPro-it MARK5/ Market Size Num,er o- Potentia! 4ustomers Market Structure P<S:/:<N Market S are :ndustr% Position S/A25 Product 0i-e 4%c!e :ndustr% 0i-e 4%c!e /R5N6S 2ro&t 6ec!ine Sta,i!it% 4BS/<M5RS Business to Business Business to 4onsumer Business to 5ducation

 Business to 2o)ernment PR<P5R/> 0ease M P!ant P 5Fui"ment <&n M P!ant P 5Fui"ment R5S:65N4> 0engt o- Residenc% MANB@A4/BR:N2 6iscrete Manu-acturing Process Manu-acturing /549N<0<2> 9ig /ec 0o& /ec KPR<6B4/ BSA25L S52M5N/A/:<N 6:M5NS:<N M ANS;5RS K9<; MB49L (<0BM5 9ig Medium 0o& (AR:5/> Sing!e Product )ersus Mu!ti"!e Products 9ig Medium 0o& @R5NB5N4> @irst /ime <ne /ime Regu!ar 4ontinuous Seasona! <ccasiona! /R5N6S 2ro&t 6ec!ine Sta,!e APP0:4A/:<N Ra& Materia! ;ork in Progress @inis ed 2ood PR<6B4/ BS5S Sing!e A""!ication Mu!ti"!e A""!ications (A0B5 49A:N

 0ocation &it in 4ustomer1s 4ustomers :ntermediar% Sa!es :MP<R/AN45 4ritica! 4om"onent :nsigni-icant Re"!acea,!e S9AR5 S are o- 4ustomer S are o- Market MARK5/ <5M <rigina! 5Fui"ment Manu-acturer MR< M Maintenance. Re"air. <)er au! M (a-termarket) Product Bse ,% Ado"tion 4ategor% :nno)ators @o!!o&ers 0aggards BS5R />P5 4urrent @ormer NonBser BB>5R S:O5 0arge Medium Sma!! 4<MPAR:S<NS Bsers )ersus NonBsers Bsers )ersus 4om"etitor Bsers 9ea)% Bsers )ersus 0ig t Bsers Bsage 0e)e! )ersus Pro-it 0e)e! KB5N5@:/S 65S:R56L S52M5N/A/:<N 6:M5NS:<N M ANS;5RS K;9>L NB5S/:<N BB>5R M</:(5S P %sica! 5motiona! Ps%c o!ogica! PR:<R:/> Primar% Bene-its Secondar% Bene-its MB0/:P0:4:/> Bsua!!% on!% one use -or "roduct

 / ere can ,e man% ,ene-its associated &it one "roduct (AR:AB05S Price (a!ue Nua!it% Re"utation Ser)ice 6e!i)er% /iming Re!ations i" Re!ia,i!it% 6ura,i!it% 5ase o- Bse :nno)ation ;arrant% 4ustomization Pa%ment <"tions 5D"erience Sca!a,i!it% 2eoSco"e (endor Size 5D"ertise /ec no!og% Patents ' MAJ<R B5N5@:/S Ser)ice Nua!it% :mage Price Must eDce! in at !east one Must ,e acce"ta,!e in a!! KPBR49AS5 B59A(:<RL S52M5N/A/:<N 6:M5NS:<N M ANS;5RS K9<;L <R2AN:OA/:<NA0 4entra!ized 6ecentra!ized P<;5R S/RB4/BR5 5ngineering @inance Sa!es Marketing

 Manu-acturing BB>5R S5005R R50A/:<NS9:P Strong ;eak Simi!arit% ,et&een ,u%er and se!!er PBR49AS5 P<0:4> Bid Price 0ease Purc ase (endor a""ro)a! "rocess R:SK A//:/B65 Risk /aker ? Risk A)erse PBR49AS5 4R:/5R:A Price Nua!it% :mage Ser)ice S"eci-ications (endor 4a"acit% S:/BA/:<NA0 :SSB5S <rder urgenc% @ast ? S!o& 6e!i)er% Product A""!ication <R65R S:O5 0arge Medium Sma!! R:SK A//:/B65 Risk /aker Risk A)erse PBR49AS5 0<>A0/> 9ig ? Medium ? 0o& MARK5/ S/RB4/BR5 Num,er o- Bu%ers in Market Bu%er :ndustr% 4onso!idation Bu%er?Se!!er Po&er 4ontinuum 4<MP05Q:/> Sim"!e Sa!es Process 4om"!eD Sa!es Process Sa!e 4%c!e /ime 4<MP5/:/:<N

Market com"etition 25<40BS/5R:N2 Bu%er 2eo4!ustering Si!icon (a!!e% M eDam"!e

$!&"'#(RA$')"! % cultural component of purchase beha*ior 4<RP<RA/5 4B0/BR5 Attitudes <"inions Persona!it% (a!ues Be!ie-s :nterests Moti)ations Se!-conce"t :deo!og% 0i-est%!e Ps%c o!ogica! Socio!ogica! Ant ro"o!ogica! BB>5R 40BS/5RS Socia! Bu%ers @actua! Bu%ers S/RA/52:4 40BS/5RS 6e-enders ? Pros"ectors ? Ana!%zers ? Reactors <R:5N/A/:<N 40BS/5RS 4ustomer <rientation @inancia! <rientation :nterna! <rientation Researc P 6e)e!o"ment <rientation PR<6B4/ A6<P/:<N 4BR(5 :nno)ators 5ar!% Ado"ters 5ar!% MaAorit% 0ate MaAorit% 0aggards: