Industrial Market Segmentation

1. IndustrialMarket Segmentation Yoram Wind and Richard Cardozo Bastien BART Hugo VALLET

2. Introduction • This paper is about a conceptual approach of the segmentation of industrial markets. • They present two examples to encourage appropriate use of market segmentation. • There are three main purpose of this paper: • Outline theoretically sound segmentation strategies. • Explore the current market segmentation practices. • Contrast theoretically-derived strategies with current practice.

3. Introduction • They will describe an « ideal » model, developped from the literature on market segmentation by understanding and questioning the current industrial segmentation practices. • To their mind this concept is as conceptually as applicable in industrial marketing as it is for the marketing of consumer goods. • The example of D. Yankelovich showed the usefulness of segmentation in industrial markets.

4. Introduction • It is also a crucial ingredient in the design of industrial marketing strategies. • Their research indicates that industrial marketers by no means use market segmentation strategies as widely as they might. • Yet two main examples which will be described make it clear that market segmentation can indeed be a profitable strategy for industrial marketers.

5. The concept and importance of market segmentation. • A market segment is simply a group of present or potential customers with some common characteristics which is relevant in explaining their response to a supplier’s marketing stimuli. • From their point of view buyers of many products may usefully be segmented into two groups: • Repeat buyers. • First-time buyers. • This concept as a marketing strategy, involves first identifying particular segments, and then developing differentiated marketing programs for each of those segments.

6. The concept and importance of market segmentation. • To be useful to marketers, segments must be sufficiently different from one another and sufficiently large and profitable to make such tailoring of marketing programs worthwhile. • According to them the identification may sometimes be very difficult or economically unfeasible, in which case the industrial marketer faces essentially one undifferentiated set of buyers. But at the other extreme, each individual customer might constitute a segment.

7. The concept and importance of market segmentation. • Wind and Cardozo purpose what they call an “ideal” segmentation model. • This model is based on an industrial markets made of two different stages: • The first involves formation of macrosegments, based on characteristics of the buying organization and the buying situation. • The second stage involves dividing those macrosegments into microsegments , based on characteristics of decision-making units(DMU).

8. The concept and importance of market segmentation. • DMU: A buying center in marketing, and organizational studies, is a group of employees, or members of any type of organization responsible for finalizing major decisions, usually involving a purchase.

9. The concept and importance of market segmentation. • This hierarchical approach enables an initial screening of organizations and selection of these macrosegments which provide potentially attractive market opportunities. • This method also provides a reduction in the total research effort and cost. Cause the deep research is limited only to macrosegments which passed the initial screening.

10. The concept and importance of market segmentation. • Finally we can notice they explain that marketers may choose key segmentation variables from an array of several dozen research to identify the most appropriate of those variables may be well worthwhile. • It’s also important to know that customer’s needs and competitor’s activities are constantly changing, so the segmentation strategy must be reviewed periodically.

11. The macro-micro model of industrial market segmentation by Y. Wind and R. Cardozo

12. Macrolevel Bases of Segmentation • Macrolevel bases of segmentation are concerned with general characteristics of the buying organization, the nature of the product application, and the characteristics of the buying situation.

13. Microlevel Bases of Segmentation

14. The industrial segmentation approach by Wind and Cardozo

16. Conclusion • For Wind and Cardozo, Industrial Marketers, in 1974, fail to employ market segmentation « as a foundation for planning and control of Marketing program ». Sometime he used only a single stage segmentation but never a sub-divised segmentation which could be use profitably. • They consider segmentation as the basis of each Marketing research and strategy. • They also think, that in using their strategies, marketers could improve the efficient of their sales, and focus their ressources directly at particular target firms.