“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”

“ 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.”

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

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

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

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

Common Basis Product Offered Buying Behavior Geographic Region Size of Account Size of Company Technology Used Industry of Customer

Segment Offering a b c d Subgroups with differing needs Key elements of value chain contributing to offering – complicated chain of activities because of complicated offering Key elements of offering addressing subgroups in the segment – complex offering Several sub- groups in the market segment due to differing needs a b c d Value Chain Value Enabling –Infrastructure –People Management –Technology Development & Mgt – Resource Acquisition Value Creating –Input Logistics –Operations –Delivery Logistics –Marketing –Service

1 2 Value ChainOfferingSegment Key elements of value chain contributing to offering – simpler chain of activities because of simpler offering Fewer key elements of offering addressing subgroups in the segment Fewer sub- groups in the market segment due to more homogeneous needs a b a b Value Enabling –Infrastructure –People Management –Technology Development & Mgt – Resource Acquisition Value Creating –Input Logistics –Operations –Delivery Logistics –Marketing –Service

Produces to sets of data:  Determine relative size and growth potential of segments  Determine individual segment needs and buying behavior

Industry classifications designed and used by the U.S. government, Canada and Mexico. Visit: for full description.

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

 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

 Size of Segment  Growth Rate of Segment  Intensity of Unmet Need(s)  Reach ability of Segment through Communications Channels  Readiness of Segment to Seek and Adopt a Solution  Likelihood of Competitive Intensity  Sufficiency of Channel Reach  Likely Value Contribution by Channel(s)  Match Between Segment Needs and Supplier’s Strengths  Differentiability of Supplier’s Offering  Opportunity to Achieve Strategic Goal by Addressing Segment  Opportunity to Achieve Learning Goal by Addressing Segment

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

AttributesSegments Scores on 5-point scale* Segment 1: Major Turnaround Segment 2: Stopping Deterioration Segment 3: Competitive Improvement Segment 4: Specific Area Improvement Potential size year 2010 (in $million) 2 $ $ $ $975.0 Growth, percent increase by % 4 100% 1 (50%) 5 150% Need strength (High variance) Competitive strength (High variance) Channel reach 5555 Communications reach 4444 Capability fit 2552 Price sensitivity 2343 Overall attractiveness (sum of attribute scores)

Also shown as Exhibit 2-6 Technophiles Visionaries Laggards Time Sales from New Adopters/ period Pragmatists Conservatives

 Technophiles—tries out the latest and greatest technology, does 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 if unless technology is easily adopted with minimal difficulty  Conservatives—only buy when doesn’t cost to adopt, need to be convinced offering exact for needs  Laggards—will avoid adoption of technology at all costs

 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

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