Nested approach to the segmentation of B2B markets
1. How to segment
Industrial Markets
nested approach
managers can determine the best segmentation method
Course: Industrial Marketing
Presented By: Shah Rukh (12485)
Sana Sadiq (12877)
Hur Hussain Syed (12479)
Faculty: Amir A. Khan
2. INTRODUCTION
Very little information available
Much difficult then consumer segmentation
Several Products, same applications
Customer differ greatly
Which differences are important OR trivial?
Most industrial marketers use segmentation as
a way to explain results rather than as a way to
plan.
IM assist companies in many ways : Analysis, Selection of key
markets & Management of Marketing
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3. Business markets vs. consumer markets
Consumer markets
Business markets
Many customers, geographically
dispersed
Fewer customers, often geographically
concentrated, with a small number
accounting for most of the company’s
sales
Smaller amounts of money involved
Larger amounts of money involved
Shorter decision cycles
Longer decision cycles
More reliance on mass marketing via
advertising, Web sites, and retailing
More reliance on personal selling
Less-rigid product standards
More-rigid product standards
4. NEW ANALYTICAL TOOL TO SEGMENT THE MARKET…
Focus complex grouping of purchase situations, events,
and personalities
5 general segmentation Criteria
Not necessary or desirable that every Industrial
marketer use each 5 criteria's
Marketer completely Understand the process & may
skip some criteria
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5. Analytical Tool- NESTED APPROACH…
• Picture explains how criteria relates to one another in a nest
• Marketer to move from general to specific segmentation
criteria
• Largest and Generic = Demographics
• Smallest and Specific = Personal Characteristics
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7. Basics of DEMOGRAPHICS Segmentation
• Most general segmentation
criteria
• Broad description of company
• Relate to General Customer Need
• Can be determined w/o visiting
customer
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15. Examples of Purchasing Approaches:
Purchasing function organization:
Centralized versus De-Centralized Approach
Global Key Accounts
Shell Pakistan was trying its best to tap KCA Deutag Pakistan, a
drilling company, however could not close the deal as all
decisions were made by their regional offices.
16. Examples of Purchasing Approaches:
Power Structure:
Identifying the right D.M.U
Dominance of Procurement / Engineering / Finance Dept over
purchase of a particular product
Uch Power needs 100,000 Litres of Turbine Oil for their newly
built plant. The power to decide would rest in a cross functional
decision making team, consisting of engineering as well as
finance dept.
17. Examples of Purchasing Approaches:
Buyer Seller Relationship
Relationship plays key role in purchase decisions. This includes
partners, joint venture establishments and industrial alliances
also.
A successful B2B marketer is the one who can build his
relationship with his customers.
Out of the office relationships can also play a role if there are
no conflict of interests.
Some marketers also end up developing friendships and
informal relationships with their buyers as well.
18. Examples of Purchasing Approaches:
General Purchasing Policies
The organizations general purchasing terms also plays an
important role for segmentation.
One can differentiate between credit and cash customers.
Long term / Short Term Policies.
Purchase patterns,
requirements.
safety
stocks
policies,
contractual
Govt owned entities have very stringent purchase policies.
19. Examples of Purchasing Approaches:
Purchase Criteria
A mix of all the criterias mentioned in the previous slides.
21. One of the most important
segmentation criteria.
As from situation factors, you
find problem areas for the
customers. From problem areas ,
you understand the marketing
implications!
22. Examples of Situational Factors:
Urgency of order fulfillment
IoBM procures diesel fuels for their standby generators every month.
Chevron usually takes 3 working days to deliver the fuel to them. On the
convocation day – due to an unfortunate spillage in their storage area – all
the diesel became contaminated and could not be used. Mr. Talib Karim calls
Mr. Amir Khan and speaks about the problem. How, in your opinion, will the
sales person respond to the customer in this situation?
Difference between routine replacements and emergency replacements
Hot-Order Shop – A factory for urgent orders only
Most companies are willing to pay an extra charge to get the job done more
quickly.
23. Examples of Situational Factors:
Product Application
Linde Pakistan (Formerly British Oxygen Company) is a
company that captures, compresses and supplies Oxygen. Ever
wondered – the marketing implication for a sales person for two
different types of customers.
– A Hospital and A Mechanical Welding Shop?
Standby Machinery V/s Critical Machinery
Routine V/s Special Scenarios
24. Examples of Situational Factors:
Size of Order
You are a Mitchells Ketchup Sales Person, How would you
differentiate between receiving a call from the Procurement
Lead of McDonalds Pakistan & a call from the local Aslam Kiryana
Store?
Volume Does Matter
Minimum Order Quantities
Implication for suppliers having multiple manufacturing
facilities
27. Examples of Personal Characteristics:
Buyer – Seller Similarities
As humans we have a natural tendency towards bias.
The most successful sellers are the ones who can find the most
similarities in their buyers.
Synergy in place – Sharing best practices
28. Examples of Personal Characteristics:
Individual Behaviors
Some people base their decisions on past experiences, some
base it on their knowledge. (eg. :3 Global suppliers, good
experience with 1 Only- MHE’s)
Relationships can play a major role. Especially in Pakistani
markets.
Descon is an engineering giant. A few years ago – some key
persons moved out of the company and formed Etimad
Engineering. Taking along with them a major chunk of business.
29. Examples of Personal Characteristics:
Risk Management Strategies
Some buyers are risk averse, others are risk receptive.
The bad news is that majority of the buyers are risk averse.
Risk Receptive Buyers can be targeted by highlighting the
positive outcomes.
Risk averse buyers need to be proof of performance.
Testimonials, Recommendations, OEM Approvals, Field Test
Results and what not !
30. Reassembling the Nest
4 other possibilities
of Segmentation
1.) No Segmentation
2.)After the fact Segmentation
• 3 outer nests = Company Variables
• Criteria change when move from Outer to inner
nest in terms of:
1.) Visibility
2.) Permanence
3.) Intimacy
3.)Superficial Segmentation
4.) Obtuse, Convoluted and
disorganized segmentation
Outer nest data:
Inner nest data:
Highly Visible
Less visible
more or less permanent
more transient
Require little intimate
knowledge of customers
Require extensive vendor
research
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32. SUMMARY
• Easy approach to use HIERARCHICAL STRUCTURE
• Marketer balance b/w “Easily acquired data from Outer nests” & “Detailed
analysis of Inner nests”
• Outer nests = More data , clear definitions
• Inner nests = detailed, more useful
•“ Data Availability” and “Analysis of available data” are two separate approaches
•Any approach can not be neglected ONLY b/c the data is unavailable
•
Cost = stay in outer nests,
cost = gain useful data of inner nests
• Inner nests not considered Ignoring buying differences b/w customers
• Small Markets Emphasis on inner nest factors is EXPENSIVE & TIME
CONSUMING
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