1. Segmenting B2B Markets Anand G. Khanna

2. Why Segmentation ? Better matching of customer needs
Enhanced opportunity for growth
Retention of customer
Targeted IM Communications
Share of the Market Segment
Enhanced operational efficiency
Better share of customer wallet

3. High-Growth Companies Succeed By:
Selecting well-defined groups of potentially profitable customers.
Focusing marketing resources on acquiring, developing, and retaining profitable customers.
Developing distinctive value propositions.

4. Five Criteria for Evaluating Potential Market Segments
Measurability
Accessibility
Substantiality
Compatibility
Responsiveness

5. Criteria for effective Segmentation
Measurable
Size , Purchasing Power, profiles of segments can be measured
Substantial
Segments must be large or profitable enough to serve
Accessible
Segments can be effectively reached and served
Differential
Segments must respond differently to different marketing mix elements
Actionable
Must be able to attract and serve the segment

6. Segmentation Benefits
Attunes marketer to unique needs of customer segments
Focuses product development efforts, develops profitable pricing strategies, selects appropriate distribution channels
Provides valuable guidelines to allocate marketing resources.

7. Bases for Segmenting Business Markets
Macro segmentation
Micro segmentation

8. Business Marketing Segmentation
Geographic
Customer Type
Customer Size
Product Use
Business
Markets
Purchasing Criteria
Purchasing Strategy
Importance
Personal
Characteristics
Micro-
segmentation
Macro-

9. MAJOR SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS
Demographic
Industry : which industries that buy this product should we focus on ?
Company size ; what size companies should we focus on ?
Location : what geographical areas should we focus on ?
Operating Variables
Technology : what customer technologies should we focus on?
User/non-user status : should we focus on heavy, medium, light users or non-users?
Customer capabilities : should we focus on customers needing many services or few services?
Purchasing Approaches
Purchasing function organization : should we focus on companies with highly centralized or decentralized purchasing organizations?
General purchase policies: should we focus on companies that prefer leasing ? service contracts? systems purchases? sealed bidding?
Purchasing criteria; should we focus on companies that are seeking quality? service ? price?

10. Situational Factors
Urgency ;Should we focus on companies that need quick and sudden delivery or service
Size of order : Should we focus on large or small orders
Organizational Characteristics (Personal )
Buyer –Seller similarity : People and values are similar to ours
Attitudes toward risk : Risk taking or risk avoiding customers
Loyalty (or Attitude) : Should we focus on companies that show high loyalty to their suppliers

11. Purchasing Strategy Classifications
Satisficers approach given purchasing requirement by contacting familiar suppliers and placing order with first supplier to satisfy product and delivery requirements.
Optimizers consider numerous suppliers, familiar and unfamiliar, solicit bids, and examine all alternative proposals carefully before selecting supplier.

12. Meaningful Micro Segments
Importance of Purchase -- appropriate when product is applied in various ways by various customers
Attitudes toward Vendors – analysis of how various clusters of buyers view alternative sources of supply often uncovers opportunities
Organizational Innovativeness – some organizations innovate more and are willing to purchase new industrial products than others
Personal Characteristics – although some interesting studies have shown viability of segmentation based on individual characteristics, further research needed to explore potential as valid base for micro segmentation.

13. An Approach to Segmentation of Business Markets
Figure combines these macro segment bases and outlines steps required for effective segmentation.
Source: Adapted by permission of the publisher from Yoram Wind and Richard Cardozo, “Industrial Market Segmentation,” Industrial Marketing Management 3 (March 1971): p Copyright 1974 by Elsevier Science Publishing Co., Inc.
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