Business English Upper Intermediate U2W09 John Silberstein

Agenda Marketing Segmentation

Today’s Dilbert

Marketing Segmentation What is Market Segmentation? The purpose for segmenting a market is to allow your marketing/sales program to focus on the subset of prospects that are "most likely" to purchase your product. If done properly this will help to insure the highest return for your marketing/sales expenditures. Depending on whether you are selling your product to individual consumers or a business, there are definite differences in what you will consider when defining market segments.

Marketing Segmentation Category of Needs Before you begin to segment your market, the first thing you need to establish is a category of need that your product satisfies. The following classifications may help.

Marketing Segmentation Category of Needs: For businesses: Strategic Your product is in some way important to the enterprise mission, objectives and operational oversight. For example, a service that helps evaluate capital investment opportunities would fall into this domain of influence. The purchase decision for this category of product will be made by the prospect's top level executive management.

Marketing Segmentation Category of Needs: For businesses: Operations Your product affects the general operating policies and procedures. Examples might be, an employee insurance plan or a corporate wide communications system. This purchase decision will be made by the prospect's top level operations management.

Marketing Segmentation Category of Needs: For businesses: Functional Your product deals with a specific function within the enterprise such as data processing, accounting, human resources, plant maintenance, engineering design, manufacturing, inventory control, etc. This is the most likely domain for a product or service, but you must recognize that the other domains may also get involved if the purchase of the product or service becomes a high profile decision. This purchase decision will be made by the prospect's functional management.

Marketing Segmentation Segmentation Needs Then you should establish what the need is and who is most likely to experience that need. Your segmentation will be determined by a match between the benefits offered by your offering and the need of the prospect. Some "need" categories for segmentation include: Reduction in expenses Improved cash flow Improved productivity Improved manufacturing quality Improved service delivery Improved employee working conditions/benefits Improvement in market share/competitive position Need for education Involvement with social trends Specific

Marketing Segmentation Segmentation Needs Need for education Prospects might be businesses or individuals looking for books on business planning, or seminars on Total Quality Management. Involvement with social trends Prospects might be businesses concerned with environmental protection, employee security, etc. or individuals who believe in say 'no' to drugs, anti-crime, etc. Specific - relating to product/service characteristics Prospects might be businesses or individuals interested in safety, security, economy, comfort, speed, quality, durability, etc.

Marketing Segmentation Factors that Segment Markets Having determined the more general segmentation characteristics you can proceed to a more detailed analysis of the market. There are literally thousands of ways to segment a market, but the following are some of the more typical segmentation categories.

Marketing Segmentation Factors that Segment Markets Industry by SIC code, Size, Job position/responsibility, Climate, Time related factors, Language, Status, Accessibility, Future potential, Ability to make a quick purchase decisions Access (or lack of access) to competitive offerings, need for customization, Product or service application to a business function. The Standard Industrial Classification (abbreviated SIC) is a United States government system for classifying industries by a four-digit code. Established in 1937, it is being supplanted by the six-digit North American Industry Classification System, which was released in 1997 In general if your offering is highly sophisticated, requires significant resources or provides greater value based on volume, then the target should be the larger enterprises. Examples of offerings might be planning software for managers or cleaning agents for maintenance managers. Examples of offerings might be dehumidifiers in areas near the ocean or snow plows in northern areas. Some services in this category are vacation related industries in summer and tax planners in the spring. An example of a language specific service is a Spanish TV channel.You might want to target businesses that are the technology leader or revenue leader or employee satisfaction leader, etc. To minimize promotion and sales expense you may want to target urban rather than rural or local rather than national prospects. A good example is how Apple Computer supplied products to schools at all levels to condition students graduating into the marketplace. Targeting individual purchasers versus business committees can significantly reduce marketing expense and increase the probability of a quick close. Cable TV business's significant investment in their service delivery system has allowed a near monopoly for some time. IBM's service reputation insured minimal competition during the mainframe days. Offerings such as police cars, busses for municipalities and specialized computer systems fall into this category. Examples are data processing, accounting, human resources and plant maintenance.

Marketing Segmentation Purchase Decision Influencers Once you have isolated a specific segment of the market on which to focus, then you can consider more subtle influences on the purchase decision. Some of these are: Number of Decision Makers, Financial Strength of the Prospect, Quantity/Volume Requirements, Commitment Required, Brand Awareness, Post Sale Support Expectations.

Marketing Segmentation Let’s look at the segmentation tree.