Segmenting Business Markets

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  • Topic: Marketing, Market segmentation, Business-to-business
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LESSON 3: B2B MARKETING - PART 2 - Segmenting Business Markets

In this lesson, we will discuss concepts and applications related to Business to Business (B2B) market segmentation. Market segmentation involves breaking down a large heterogeneous market into smaller homogeneous markets. Separate marketing programs – the marketing mix - can then be developed to meet the needs of each segment. Concentration of marketing solutions is the key component of all marketing plans, and market segmentation is the tool that allows marketers to achieve this focus.

LESSON OUTCOMES
By the end of this lesson you should be able to:
1. Describe the bases for segmenting business markets
2. Discuss alternative strategies for selecting target markets

* LESSON CONTENT
SUBTOPICS:
1. Segmenting Business Markets
2. Market Strategies for Business
3. Product Positioning

SUBTOPIC 1. Segmenting Business Markets
You’ll recall from Lesson 2 that essentially markets are segmented for three reasons: First, to enable the identification of groups of customers with similar needs, and the analysis of their buying behavior. Secondly, segmentation provides information for the specific matching of the design to marketing mixes with the characteristics of the segment. Segmentation also helps marketers to satisfy customers while meeting their organization’s objectives.

A segmentation base is a characteristic or variable of individuals, groups, or organizations that is used to divide a total market into segments. Markets can be segmented using a single or multiple variables.

The five bases of segmentation commonly used in the B2C marketplace we learned are: 1. Geographic is based on region, size, density, and climate characteristics. 2. Demographic is based on age, gender, income level, ethnicity, and family life-cycle characteristics. 3. Psychographic includes personality, motives, and lifestyle characteristics. 4. Benefits segmentation identifies customers according to the benefits they seek in a product. 5. Usage segmentation divides a market by the amount of product purchased or consumed. Bases for Segmenting Business Markets:

We know that the business market consists of four broad segments described as producers, resellers, institutions, and governments. However, just as with consumer markets, further segmentation can help B2B marketers to better refine their marketing mix.

Company characteristics, such as geographic location, type of company, company size, and product can be used as segmentation variables. Customer type allows business marketers to customize their programs to the unique needs of particular types of organizations or industries. Information from sources such as Statistics Canada , U.S. Census Bureau and the North American Industry Classification System (NAICS) are used by many marketers to tailor programs to specific business sectors.

Firmographics is a term often used to describe this segmentation based on various characteristics of an organization. What demographics are to consumer markets, Firmographics are to organizations. Commonly-used firmographics include employee size, revenue size, industry, number of locations and location of headquarters. Marketers typically combine several variables to define a Firmographics profile of their target market customers. Food for thought: Jeffrey Henning, Founder & VP, Strategy at Vovici (Voice of the Customer technology solutions) provides historical notes on the introduction of the concept of Firmographics and its uses in B2B marketing including a template that you might find useful!

How they buy segmentation is another variable that can be very useful to marketers developing programs for the business buyer. The descriptors of these high level attributes are:

a.) Satisficers usually contact familiar suppliers and place an order with the first to satisfy product, delivery requirements or other...
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