Continuing the publication of our latest white paper on market segmentation, today we look in furter detail at the steps required of a comprehensive segmentation analysis by firstly looking at how to segment and secondly by focussing on the needs of customers.
Step 3: Consider a Firmographic Segmentation
The question is, “how to segment?�. One of the simplest ways is to group together companies with a common physical attribute such as they are in a certain region, or classified in a particular industry. This is the equivalent of demographic segmentation in a consumer company. The classifications are important as they are often critical to understanding their needs. Demographics in consumer markets and firmographics in business to business markets is after all an important driver of its needs. A company selling welding equipment knows that welders in shipyards have quite different needs to welders in car assembly plants and so the industry grouping immediately flags up their need for a different offering. The needs for oil lubrication in the engine room of a supertanker are quite different to the needs for lubrication in the engines of the cars you and I drive. A segmentation according to industry grouping is therefore one of the most obvious and often most useful we can employ in business to business markets.
Step 4: Look Where Possible for a Needs-Based Segmentation
However, there are potential problems with segmentations based on industry. A company selling accountancy software may find that there is little difference in the needs for its products in a food company compared to one that makes steel. A company selling office copiers is unlikely to find much help from an industry segmentation that separates out manufacturers of safety pins from manufacturers of safety products. In many markets the needs of customers have a good deal of crossover. Customers in a segment made up of heavy manufacturing companies could have the same need for customer service as companies making light electronic goods.
Furthermore, the segmentation based on industry groupings is so obvious that the chances are that this is how everybody does it. In other words there is no competitive advantage to be achieved in doing what everyone else is doing.
A segmentation based on needs is, in theory, the ideal as it gets to the heart of marketing; that is the identification and satisfaction of customers needs’ – at a profit of course. There are however, a number of practical problems in achieving a needs based segmentation in business-to-business markets.
This entry was posted
on Tuesday, January 15th, 2008 at 10:22 am and is filed under Market Research, Segmentation, White Papers.
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