B2B MKTG

1. Vitale and Giglierano B2B MKTG 2002 Edition Chapter 7 Segmenting, Targeting, and Positioning Prepared by John T. Drea, Western Illinois University

2. 3 Basic Concepts in B2B Marketing Segmenting Targeting Positioning

3. Basic Ideas of Segmentation Measureability Marketers seek to create market segments that have the characteristics of Accessibility Substantiality Actionability

4. Can we communicate with the segment so that serving the segment is possible? Accessibility Does the segment desire that values that an offering presents? Substantiality Can we understand the size and needs of the market segment? Measureability Can we create a competitive advantage with respect to the needs of the segment? Actionability

5. By industry in which the customer participates Common Bases for Segmentation By product offered By geographic region By size of account By size of the customer’s company By buying behavior By technology used by the customer

6. Value-Based Segmentation Value: the sum of the benefits minus the sum of the costs Companies should try to choose and address segments that are homogenous in the kinds of value sought. Homogenous Segments Heterogenous Segments

7. Analytic Approach to Segmentation Analytic approaches need two sets of data: • Information about segment size and growth • Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes are useful. • Information about each targeted segments needs and buying behavior.

8. Exhibit 7-3: Hypothetical Segmentation Data • From secondary data (US Census data) • Number of business with 50-500 employees 375,000 • From quick survey of consultants • Seg 1: Major turnaround 10% • Seg 2: Stopping deterioration 20% • Seg 3: Competitive improvement 30% • Seg 4: Specific area improvement1 50% • From Delphi estimate of small business consultants: • Seg 1: Change in major turnaround by 2002 +100% • Seg 2: Change in stopping deterioration by 2002 +100% • Seg 3: Change in competitive improvement by 2002 -50% • Seg 4: Change in specific area improvement by 2002 +150% 1 – can overlap with other categories

9. Exhibit 7-4: Hypothetical Sizes of Market Segments • This shows how an analytic approach can be used to estimate segment size and growth. • To complete the analysis, data is also needed on the needs and buying behavior for each segment. Go to Exhibit 7-6

10. Segmentation by Discovery • Sometimes, a business starts serving only 1-2 large customers. • Over time, additional customers who seek something similar to the original offering are recruited/attracted. In this way, a new segment is “discovered.” • Field marketing personnel must be coached to recognize such discovery opportunities. • Proprietary information of different customers must be respected.

11. Exhibit 7-5 Factors in Assessing Segment Attractiveness • Size of segment • Growth rate of segment • Intensity of unmet needs • Reachability of segment through communication channels • Readiness of segment to reach and adopt a solution • Likelihood of competitive intensity • Sufficiency of channel reach • Likely value contribution by channel(s) • Match between segment needs and supplier’s strengths • Differentiability of supplier’s offering • Opportunity to achieve strategic goal by addressing segment • Opportunity to achieve learning goal by addressing segments

12. Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations Attractiveness of Segments

13. Market Attractiveness • Large and fast growing segments are more attractive than smaller and slow-growing segments • This necessitates accurately predicting future growth. • Other issues include • Adaptability of market segments, • Existing relationships with the buying center members, and • Available customer’s budget Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations

14. Competitive Attractiveness • What is the likely existence or emergence of competition in the market segment? • Are there barriers to entry facing competitors? • Does being first to market provide an advantage? Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations

15. Channel Attractiveness • It is preferable to target customers already served by well-established marketing channels, or if an existing channel can be adapted, it may serve the segment. • When there is no suitable existing channel, a market view of competition may be necessary. • How is the existing need being met? • Will customers switch? Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations

16. Internal Attractiveness • A segment is more attractive when the segment’s needs can be met by the firm’s core competencies. • This is identified through environmental analysis. Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations

17. Exhibit 7-6 Segment Attractiveness

18. Attractiveness – Other Considerations • Other factors that might cause a segment to rated higher or lower include: • Public policy (excessive government regulation can cause a segment to be downgraded) • Organizational goals (market share goals may make firms more aggressive in targeting) Market Attractiveness Competitive Attractiveness Channel Attractiveness Internal Attractiveness Attractiveness – Other Considerations