 Know the Procedure followed for segmenting

industrial markets

 Identify the Variables (bases) used for segmenting

business markets

 Evaluate and select the target market segments

and strategies

 Develop effective positioning strategies

INDUSTRIAL MARKETING: Chapter 6 3

 Market Segmentation
• Industrial customers , like consumers, differ in their
needs, resources and buying attitudes
• A practical approach to understand these differences is to
identify variables by which the potential buyers can be
segmented.
• Market segmentation strategy is to identify groups of
firms whose purchasing requirements and responses to
marketing programs.
Market Segmentation and product positioning
model

Market Segmentation Target Marketing

Product positioning

• Identify measurable, • Evaluate resulting

• Develop
relevant and operational macro/micro
product/market
variables for segmenting segments
positioning for each
the market • Decide on market
target market
• Define the macro profiles coverage
• Develop marketing
for segmenting the • Select the target
mix
market segment
• Define micro profiles for
resulting macro
segments
Requirements for Effective market
segmentation
• Information on the variables of interest should exist and be
Measurable obtainable either through secondary or primary information
sources

• The variables chosen should impact on decision making for a

Relevant significant number of potential customers groupings

• Variables chosen for evaluation among customer groups

Operational should be related to differences in customer requirements
and buying behavior

5-6
 Macro-Variables used to segment industrial markets
Variables Examples

Industry Agriculture, mining, construction, manufacturing, services

Organizational characteristics

Size Size of customer business, number of plants sold.

Plant characteristics Size of the customers plant , age, degree of automation

Location from the plant Distance from plant, Suburban/rural/urban location

Economic factors Cyclicality of customers industry

Customers industry Growth rate of the industry, ultimate customer of customers products

Competitive forces Degree of competition, ease of entry & ease of switching.

Purchasing factors Decentralized vs centralized, No of levels of purchasing authority

Residential/commercial contractors, coal/ore miners, foresters,
End-use markets
banks/insurance houses
Product application Small appliance, computer, television, airplane manufacturers

5-7
 Micro-Variables used to segment industrial markets

Variables Examples

Organizational variables

Purchasing situation / phase New task, modified or straight-rebuy

Customer experience stage Product life-cycle stages (i.e. introduction, growth and maturity)

Dependance on supplier in implementing decision making process or

Customer interaction needs
suppliers knowledge compared to customers knowledge

Product innovativeness Innovative firms Vs Followers

Organizational capabilities Extent of operating, technical or financial capabilities

5-8
 Micro-Variables used to segment industrial markets

Variables Examples

Purchasing situation variables

Inventory requirements Material requirement planning or JIT systems

Purchase importance Degree of perceived risk (i.e cost, usage factors, time etc.)

Purchasing policies Market based-prices, bids or leasing preferences

Purchasing criteria Supplier reputation, technical services, reliability, flexibility. Etc

Structure of the buying center Key influencers & decision makers (e.g. Engineering, plant manager, R&D)

Individual variables

Demographics (age and experience), personality, non-task motives, risk

Personal characteristics
takers/avoiders

Power structure Colloboration, compromise, avoidance .

5-9
• Client Computing Group
• Data Centre Group
• Internet of Things Group
• Software and services Group
Bosch Starter Motor
 Industry characteristics

Food,
Automotive Marine Agricultural Beverages & Manufacturing
Tobacco
 Based on unit sales potential

High Medium Low

 Based on region

North India South India

 Based on region

East India West India

 End use market & applications

Foods &
Marine Agricultural Automotive Manufacturing
Beverages
Passenger
Packaging/ Cars
Ships
Bottling
Use in
Refrigeration Assembly
special
Trucks Lines
machinery
Conveyor
Submarines Commercial
Belts
Cars
Ingersoll Rand Products
 Evaluating potential segments
• Market potential
Market • Sales potential
Profitability
• Sales forecast
analysis
• Profitability

• Strength and weakness of existing / potential competitors

Competitive • Assessment of their capabilities in the area of R&D, finance,
Analysis technical services, advertising, distribution and support
systems

• Performance attributes deemed important to management

Decision such as growth potential, RoI and cash flow
support
• Other variables include timing of production, cyclical
systems demand, inflation vulnerability, technological strength.

5-20
 Target Marketing
• When products are relatively standardized
Undifferentiated • Potential market exists in a broad spectrum of industries
Market selection • For example, Lubricants
• Develops single marketing program

• Offer products to a number of diverse segments

Differentiated • Increases overall cost in terms of product development and modification.
Market selection • Higher sales, deeper position in each segment
• Separate marketing strategy for each segment

• Company resources are limited

Concentrated
market selection • Company may chose to go after a large share of one of the few markets to
achieve a strong market position within the chosen market

• Enables an organization to provide products to buyers who are seeking

Niche marketing products that are specifically tailored to their individual desires and
preferences.

5-21
 Product Positioning

Positioning is not what you do to the product.

Positioning is what you do to the mind of the

prospect.
PROCEDURE FOR DEVELOPING A POSITIONING STRATEGY

Following steps are involved :

(i) Identify which attributes / benefits target customers
consider important while buying a product / service. This
information is obtained through a market research study . The
variables considered for differentiating a company’s product
from competing products are.
(a) Product variables,
(b) Service variables,
(c) Personal variables,
(d) Image variables,

(ii) Select one or more major benefits (or attributes) to differentiate

the company from its competitors .

23
(iii) Use Perceptual Mapping Technique. To decide
on positioning strategy, this technique is used,
after getting customers’ perceptions through
marketing research.

(iv) Communicate Positioning Strategy. The firm

should decide and communicate its positioning
strategy to target customers, through sales
force, advertising in journals, internet, and trade
shows

24
 Excellent
Product Quality

1.0

.A 1
0.8
.D
0.6

.C 0.4

Strong
0.2 Weak
1.0 0.8 0.6 0.4 0.2 - 0.2 - 0.4 - 0.6 - 0.8 - 1.0
Customer Customer
Service Service
- 0.2
.B
- 0.4

- 0.6

- 0.8
A
- 1.0

Perceptual Mapping Low

Technique Product Quality

25
Use of Perceptual Maps
 Use of perceptual maps

Performance
High

Energy
Low High consumption

Low
 SUMMARY
 Procedure used in market segmentation includes (i) Marketing research, (ii)
Data analysis (iii) Profiling each segment

 Variables used for segmenting industrial markets include macro variables

and if needed, micro variables. Sequential segmentation process is often
used

 Criteria used for evaluating market segments are (i) size and growth , (ii)
Profitability (iii) Competitive analysis (iv) Company Objectives and
Resources

 Target market strategies are (a) Concentrated or Niche marketing, (b)

Differentiated marketing, (c) Undifferentiated marketing strategy

 Steps used for developing positioning strategy include :

(i) Identifying attributes / benefits, (ii) Selecting one / more major benefits,
(iii) Using perceptual mapping technique,
(iv) Communicating positioning strategy.

INDUSTRIAL MARKETING: Chapter 6 28

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