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Marketing Management - Industrial Market Segmentation OR B2B Market Segmentation

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Industrial Market is another name for B2B (Business to Business) Markets.
This presentation focuses on
1. Segmentation Variables for Business Markets
2. Effective Segmentation Criteria
3. Steps in Segmentation Process

Published in: Marketing
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Marketing Management - Industrial Market Segmentation OR B2B Market Segmentation

  1. 1. Industrial Market Segmentation
  2. 2. Consumer Market Segmentation = B2C Market Segmentation Industrial Market Segmentation = B2B Market Segmentation But we will continue on B2B Market Segmentation
  3. 3. How shall we proceed? 1. Segmentation Variables for Business Markets 1. Demographic 2. Operating Variables 3. Purchasing Approaches 4. Situational Factors 5. Personal Characteristics 2. Effective Segmentation Criteria 1. Measurable 2. Substantial 3. Accessible 4. Differentiable 5. Actionable 3. Steps in Segmentation Process 1) Needs-Based Segmentation 2) Segment Identification 3) Segment Attractiveness  Porter’s Five Force Model 4) Segment Profitability 5) Segment Positioning 6) Segment “Acid Test” 7) Marketing-Mix Strategy
  4. 4. 1. Segmentation Variables for Business Markets
  5. 5. Snapdragon (by Qualcomm) [S]
  6. 6. Tata Steel [T]
  7. 7.  Industry: Which Industries should we serve? S: Mobile Phones Manufacturing Industries. Companies like Sony, Motoroala, etc. are part of this industry. T: Automobile, Aerospace, Rail and Other Manufacturing Industries. Companies like Maruti, Godrej Interio  Company Size: What size companies should we serve? S: Medium to Large sized companies. From Karbonn to Samsung T: Medium to Large sized companies. From Godrej Interio to L&T  Location: What geographical areas should we serve? S: All areas in the world T: South-East Asian, Indian, and European regions. 1) Demographic
  8. 8.  Technology: What Customer Technologies should we focus on? S: Octa-core, faster processing e.g. Krait processors T: Different grades of steel for different companies according to their manufacturing requirements  User / Non-User Status: Should we serve heavy users, medium users, light users, or non users? S: Focus more on Heavy users and cater to other users as well T: Focus more on Heavy users and Medium users  Customer Capabilities: Should we serve customers needing many or few services? S: Few Services. T: Few Services. 2) Operating Variables
  9. 9.  Purchasing-function organization: Should we serve companies with a highly centralized or decentralized purchasing organization? S: Highly Centralized T: Both, Highly Centralized and Decentralized  Power Structure: Should we serve companies that are engineering dominated, financially dominated, and so on? S: Engineering Dominated T: Financially Dominated and Engineering Dominated  Nature of Existing Relationship: Should we serve companies with which we have strong relationships or simply go after the most desirable companies? S: Most Desirable companies T: Both 3) Purchasing Approaches
  10. 10.  General Purchasing Policies: Should we serve companies that prefer leasing? Service contract? Systems purchases? Sealed bidding? S: Systems Purchases T: Systems Purchase, Service Contract  Purchasing Criteria: Should we serve companies that are seeking Quality? Service? Price? S: Quality. Snapdragon, unlike MediaTek, focuses on Quality rather than Price T: Depends company to company. Some might require Quality, some Service while others Price. 3) Purchasing Approaches
  11. 11.  Urgency: Should we serve companies that need quick and sudden delivery or service? S: No T: Can cater to Sudden Delivery demands if it has enough inventory in place.  Specific Application: Should we focus on a certain application of our product rather than all applications? S: All Applications T: Certain Application or All Application, this doesn’t matter  Size or Order: Should we focus on large or small orders? S: Large Orders T: Medium sized Orders to Large 4) Situational Factors
  12. 12.  Buyer-seller similarity: Should we serve companies whose people and values are similar to ours? S: Yes, but not necessary T: Not at all necessary because Tata it is a product based company and not service based, hence the transactions with people will be lower in number  Attitude towards risk: Should we serve risk-taking or risk-avoiding customers? S: Risk Taking T: Both, Risk-Taking and Risk-Avoiding  Loyalty: Should we serve companies that show high loyalty to their suppliers? S: High Loyalty (Repeat orders) T: Same for Tata Steel, High Loyalty 5) Personal Characteristics
  13. 13. 2. Effective Segmentation Criteria
  14. 14. 1) Measurable 2) Substantial 3) Accessible The size, purchasing power, and characteristics of the segments can be measured. The segments are large and profitable enough to serve. A segment should be the largest possible homogenous group worth going after with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for people who are less than four feet tall. The segments can be effectively reached and served.
  15. 15. 4) Differentiable 5) Actionable • The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs. • Example: Married and unmarried women respond differently to different products such as dress materials, cosmetics, households products, etc. • Effective programs can be formulated for attracting and serving the segments. • Example : Cigarette manufactures cannot promote their product directly through the different medias such as television, newspaper, internet, etc. therefore they have to take different approach to promote their product.
  16. 16. 3. Steps in Segmentation Process
  17. 17. 1) Needs-Based Segmentation 2) Segment Identification Group customers into segments based on similar needs and benefits sought by customers in solving a particular consumption problem. For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable.
  18. 18. 3) Segment Attractiveness Competitive Rivalry Threat of New Entrants Bargaining Power of Suppliers Threat of Substitutes Bargaining Power of Buyers Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment. Porter’s Five Force model is the ideal choice to determine the market attractiveness
  19. 19. 4) Segment Profitability 5) Segment Positioning Determine Segment profitability For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics. 6) Segment “Acid Test” Create “segment storyboard” to test the attractiveness of each segment’s positioning strategy. 7) Marketing-Mix Strategy Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, and place.

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