Business Marketing

The Business Market:

Segmentation
PGDM 2015-17 / Trim5 / S02

Amarnath Krishnaswamy

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Segmentation Why

Segmentation
Focus makes marketing more
effective.
Use strengths more effectively in
the areas of opportunities that have
been identified.

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Segmentation

Segmentation involves identifying groups of similar

customers big, and unique enough to justify a
separate marketing strategy

Do this in terms of:

Competitive environment
Technological environment

Then commit to the segment

Investment is relatively more than in consumer marketing

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Segmentation How

Segmentation many ways

Use the National Industrial Classification System
www.mospi.nic.in
Classification of activity under 3 broad categories
Primary production (Agriculture & Mining)
Secondary production ( Manufacture and Construction)
Services (Transport, Commerce, Administration, etc.)

In line with the International Standard Industrial Classification

(ISIC)

Mospi : Ministry of Statistics & Programme Implementation

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 NIC - extract

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Segmentation How

Segmentation many ways

Macro-segmentation
Product based (like NIC 2008)
Firm-o-graphics
Organizational (Age, Size, Location, Employees, etc.)
Financial (Turnover, Profits, Market share, etc.)
Industrial characteristics (Product category, Usage
rate.etc.)
Structure of purchasing function
Value in use
Purchasing situation
New
Repeat

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Segmentation How

Segmentation many ways

Micro-segmentation
Characteristics of the decision-making units
New task / Rebuy
Transactional buyers
Relationship buyers
Cost / Value

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Using firm-o-graphics to characterize businesses

Business 1 Business 2

Product Car Batteries Cars

Sells To (Segment) Car manufacturers Dealers

Segment Location Outside cities Within the city

Segment - Workers Many, Unionized Few, Not unionized

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 An approach to segmentation
Identify macro-segments (Product, Size, etc.)

Select appropriate macro-segment(s)

Evaluate each segment on its If favorable, select Stop if macro-

response to your marketing program macro-segment based segment =
(Favorable / Unfavorable) on marketing criteria target segment

If unfavorable, within each macro-segment(s) select

appropriate micro-segment (Purchasing strategy, etc.)

Select desired target segment based on marketing criteria

Define complete profile of segment macro, micro,

marketing criteria
Wind & Cardozo Model

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 Segmentation Criteria

Four criteria to determine the usefulness/desirability of

segmentation

Homogeneity Characteristics must be shared

Measurability Data must be available

Accessibility The segment should be reachable

Substantiality The segment should be profitable

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 Segmentation - Benefits

Benefits of doing this:

Business becomes attuned to the customer

Helps product development

Helps in allocating marketing resources

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 Business Market - Segments

Seen that segments are broadly related to:

A) Product characteristics
B) Purchasing characteristics
C) Decision makers characteristics

Each of these have further sub-divisions

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 A) Product Characteristics

Products can be characterized based on:

1. Price sensitivity
2. Required quality
3. Desired benefits
4. Technical requirements
5. Speed of delivery

Examples?

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 A) Product Characteristics 1

1. Price sensitivity
Buying based on price
Sacrificing benefits and features
Requires that (strategy)
Be price competitive
Sell high volumes
Low profit margin

Examples?

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 A) Product Characteristics 2

2. Required quality
Buying based on best quality.
Requires that (strategy)
Price not a limiting factor
Low sales volumes
High profit margin

Example?

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 A) Product Characteristics 3

3. Desired benefits
Buying is value
Common in many industries
Requires that (strategy)
Differentiation based on benefits

Example?

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 A) Product Characteristics 4

4. Technical requirements
Buying is spec oriented
Product must perform effectively, efficiently and
consistently
Requires that (strategy)
Possibly custom produce
Possibly need high quality equipment, staff

Example?

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 A) Product Characteristics 5

5. Speed of delivery
Combined with other factors
Comes at a cost
Requires that (strategy)
Possibly standardization

Example?

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 A) Product Characteristics - Conclusion

Conclusion
Knowing the segment that works best will help you
pick and choose the segment to focus on to
maximize your returns

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 B) Purchasing Characteristics

Need 3 types of purchasing information

(characteristics)
1. Purchasing approach
2. Purchasing situation
3. Purchasing volume and frequency

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 B) Purchasing Characteristics 1

1. Purchasing approach
Classified by
How purchasing function is organized
Centralized vs. Decentralized
Ordering / Payment vs. Ordering & Payment

Example?

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 B) Purchasing Characteristics 2

2. Purchasing situation
Specific to the businesss needs.
Need can be:
Quicker delivery
Consultation: technical etc

Example?

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 B) Purchasing Characteristics 3

3. Purchasing volume & frequency

Small vs. large
Often vs. spaced out
Use the 80:20 rule

Example?

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 B) Purchasing Characteristics - Conclusion

Conclusion

Easy way to use market segmentation

Records available
Easy to identify others in the market with the same
characteristics

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 C) Decision Makers Characteristics

Three main types of decision maker characteristics

1. Based on purchasing function
2. Based on risk acceptance
3. Based on personal characteristics

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 C) Decision Makers Characteristics 1

1. Based on purchasing function

Business culture
Freedom for purchase decisions
Responsibility for purchase decisions

Example?

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 C) Decision Makers Characteristics 2

2. Based on risk acceptance

Risk taking vs. risk avoidance
Experienced vs. Inexperienced
Senior vs. Junior

Example?

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 C) Decision Makers Characteristics 3

3. Based on personal characteristics

Personal background
Demographics
Needs & Values

Example?

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 C) Decision Makers Characteristics - Conclusion

Conclusion

Yields a lasting relationship

Loyalty to your business & product

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 Business Market Segment - Summary

Business markets differ in many ways

Organizational / Financial / Industrial

Important to identify those differences and use them

to your advantage

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

 Volunteers?

Identify the industry (Maybe the one youve worked

in)
Identify the product
Identify the users
Segment the users
Primary
Secondary
Give the basis

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 Chemplast Sanmar - Solvents

First level segmentation: Industry

Ref gases 30%
Pharmaceuticals 40%
Photofilms 10%
Others 20%

Second level segmentation:

Ref gases: Product R11/R12/R22 (20/45/35)
Pharmaceuticals: Region North / South / East / West

Third level segmentation:

R11: Usage Blowing agent / Compressors

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 M - More from Murphy !

Murphys Law of Copies

The legibility of a copy is
inversely proportional to its
importance.

Murphys Military Law

The enemy never watches
until you make a mistake!

Murphys Technology Law

Logic is a systematic method of
coming to the wrong conclusion with
confidence.
20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02
 Moving Forward

Sessions S-03 & 04: Wednesday, Sep 28, 2016

Subject: Buying Process 1 & 2

Read:
Hutt & Speh: Business Marketing Management
Chapter: The Business Market: Perspectives on the
Organizational Buyer
Chapter: Organizational Buyer Behavior

Corey : Industrial Buyer Behavior

Bonoma: Who Really Does The Buying?

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02

20-Sep-2016 NMIMS / PGDM 2015-17 / Trim5 / S02