Bases for Segmenting Business Markets

We can segment business markets with some of the same variables we use in consumer markets, such as geography, benefits sought, and usage rate, but business marketers also use other variables (see Table 6.2). The demographic variables are the most important, followed by the operating variables—down to the personal characteristics of the buyer. Within a chosen target industry, a business market can further segment by company size and set up separate operations for selling to large and small customers. A company can segment further by purchase criteria.

Business marketers generally identify segments through a sequential process. Consider an aluminum company: The company first undertook macrosegmentation. It looked at which end-use market to serve: automobile, residential, or beverage containers. It chose the residential market, and it needed to determine the most attractive product application: semifinished material, building components, or aluminum mobile homes. Deciding to focus on building components, it considered the best customer size and chose large. The second stage consisted of microsegmentation. The company distinguished among customers buying on price, service, and quality. Because it had a high-service profile, the firm decided to concentrate on the service-motivated segment of the market.

Business-to-business marketing experts James C. Anderson and James A. Narus have urged marketers to present flexible market offerings to all members of a segment.⁹ A flexible market

TABLE 6.2 Major Segmentation Variables for Business Markets

Demographic

1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?

Operating Variables

4. Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches

7. Purchasing-function organization: Should we serve companies with a highly centralized or decentralized purchasing organization?
8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?
9. Nature of existing relationship: Should we serve companies with which we have strong relationships or simply go after the most desirable companies?
10. General purchasing policies: Should we serve companies that prefer leasing? Service contract? Systems purchases? Sealed bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

Situational Factors

12. Urgency: Should we serve companies that need quick and sudden delivery or service?
13. Specific application: Should we focus on a certain application of our product rather than all applications?
14. Size or order: Should we focus on large or small orders?

Personal Characteristics

15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours?
16. Attitude toward risk: Should we serve risk-taking or risk-avoiding customers?
17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

Source: Adapted from Thomas V. Bonoma and Benson P Shapiro, Segmenting the Industrial Market (Lexington, MA: Lexington Books, 1983).

offering consists of two parts: a naked solution containing the product and service elements that all segment members value and discretionary options that some segment members value. Each option might carry an additional charge.