Industrial market segmentation

 Market segmentation – “ process of dividing

the total market for a product into several
segments or distinct group of buyers with
common characteristics”.
 Each group of buyers are homogeneous and
may require separate benefits from the product
Market segmentation procedure
segmentation
Carry out marketing research

Identify segmentation variables from

the analysis of market research data

Prepare profiles of the resulting

segments
 Target marketing
Evaluate the resulting segments

Select the target segment

Decide target market strategy

 Positioning
Identify target customers attributes for
differentiation

Select the right attributes or benefits

Communicate the chosen position to each

target market
Marketing research (market segmentation)
 Secondary research is done for collecting information on
markets from co’s past data,online databases or industry
associations.
 If sy. Research info. is adequate,no need to collect
primary data(descriptive research)
 If info. Collected is inadequate, descriptive research
should be done to collect the following info. From
industrial buyers
* purchasing attributes considered by buyers
* Buyers requirement of company’s product&
their purchasing policies
* competitors information
* buying behavior of buyers, buying phases &
buying situations
 Analysis
Statistical technique – Analysis
2. Factor analysis

used to remove highly correlated variables

2. Cluster analysis
used to identify different segments which
are mutually exclusive & at the same time
each segment is homogeneous
 Profiling
 Each group of customers are profiled by
its specific characteristics as :
- application of the product
- volume of requirements
- type of industry
- location
- purchasing policies
- major purchasing attributes
- buyer’s personal characteristics
- buying behavior
Benefits of market segmentation
 Enables industrial marketer to compare
mkg. Opportunities of different mkt.
segments by studying customer needs &
potential, competition & satisfaction levels
of customers
 Industrial firms develop separate mkg.
Pgms. to meet the needs of different mkt.
segments
 Budgeted allocation of resources done
effectively to various segments & hence
mkg. resources used more efficiently.
Limitations of market segmentation
 Increase in mkg. Expenses – inventory
carrying cost, advertising cost,
transportation……
 Difficulty in segmenting due to the
differences in buying practices, customer
characteristics, product applications &
benefit sought by different members of
buying center.
Criteria – selection of segmentation
variable
 Measurable
variables used should measure sales potential
or qty. of product required by customers & other
customer info.
 Differentiable
segments should be distinguishable & should
respond differently to separate mkg. Plans or
strategies
 Substantial
segments should be large enough in terms of
sales potential & profits
 Identifying variables – segmenting
industrial markets
Segmented Approach
 Demographic  Macro variables
variables(age,income)  Micro variables
 Psychographic
variables(lifestyle,
personality)
In some instances, after using one variable it may be necessary to further
subdivide the market by other segmentation variable to obtain a more
detailed segmentation scheme called
SEQUENTIAL SEGMENTATION PROCESS
MACRO- SEGMENTATION
 This approach identifies macro- variables on the
basis of
* Industry / organizational characteristics
Such as type, size, geographic location or product
application.
 Information obtained through secondary sources like

* trade directories
* business magazines
* govt. publications
* company sources
Micro- segmentation
 Micro segments are homogeneous groups of
customers within macro – segments
 Industrial marketers subdivide macro into micro
segments only if necessary
 Micro variables are based on purchasing decisions
 Micro – variables:
• Buy phases
• Organizational capabilities
• Purchasing policies
• Purchasing criteria
• Personal characteristics
Major variables used for segmenting
industrial markets
MACRO VARIABLES
 Type of industry(customer)
 Which industries should we market our products or
services
 Types of customers include govt, commercial,
cooperative, & institutional
2. Company size(usage rate)
 What size of should we focus on?Based on sales
potential(usage) mkt is segmented into medium &
small (A, B, & C) size customers
Contn…
3. Customer location
 What geographical areas should we
concentrate? Customers located near the
factory or cluster of customers located in
various urban areas
4. Application of product (end use)
 Should we focus on certain end- uses instead
of all the uses?Al extrusions are used for
window frames,control panels, TV antennas…
 Micro - variables
1. Customer interaction needs
 Should we serve more customers who need
more information or discussions in DM process
from the suppliers
3. Organizational capabilities
 Should we concentrate on customers who
need financial support(more credit), more
services or technical support?
5. Purchasing policies
 Should we focus on customers who prefer
competitive bidding or mkt based negotiated
prices or service contracts?
 Contn….
4. Purchasing criteria
 Should we serve the customers who seek
quality, service or price?
5. Personal characteristics
 Should we focus on customers based on
the personal characteristics of buying –
center members such as risk takers, risk
avoiders, or personal motives
Evaluating market segments
 Size & Growth
Mkt. Potential obtained by demand
forecasting methods as
• Time series analysis
• Regression analysis
• Econometric models
• Sales force estimates
• Expert opinion
Analysis indicate what is the size &
estimated market growth of each
segment.
 Profitability analysis
 Market potential
estimate the quantity & value of a product
that the entire mkt.purchase during specified
time period
 Sales forecast
estimate of co’s sales based on the co’s
share out of the mkt. Potential in a specified
time period
 Profitability
refers to the difference b/w estimated sales
revenue(sales forecast) & the marketing cost
servicing & maintaining customers in same time
period
Competitive analysis
 Penetrating a particular mkt. Depends on
a careful analysis of strengths &
weakness of existing or potential
competitors.
 It must be assessed in each mkt segment
w.r.t to areas of mfg., R&D,
finance,product quality,sales
force,advertising,technology……
Company objectives & resources
 Find whether each potential segment is in
line with firm’s long- term objectives, if not
eliminate segments.
 A company will succeed in a segment if it
has certain resources superior to
competitors.