INDUSTRIAL MARKET SEGMENTATION
Segmentation involves sub-dividing the market into distinct subsets of customers who are
relatively homogeneous, so that specific marketing mix strategies can be developed to secure
each segment. To be useful to a marketer, a segment should be
1. Sufficiently large (so that it can provide a sustainable market)
2. Accessible (This ensures that the supplier can easily reach the customer). Accessibility is
viewed from the point of view of infrastructure (transport) as well as communication
(telephone, internet and so on)
3. Have a potential for growth (should have clear indicators for sustained growth)
4. Measureable – degree to which size and purchasing power of buyers can be measured.
5. Actionable – degree to which effective programs can be designed for attracting and
serving a five market segment.
Some of the factors used in industrial marketer segmentation are:
1. Customers’ size: it is important to consider the size of the customers who buy majority
of your products. The general guideline is 80/20, i.e 80% of your products should go to
20% of the customers, this would allow for close (individualized) attention of the
customers. It is better to have a few large consumers of your products than to have many
2. Technology involved – some products require technical sales support or technical
services and these may be designed for specific customer groups.
3. Heterogeneity involved – the segments should be homogeneous as within themselves.
There are both micros as well as macro-variable that can be used. Macro – variables
Industrial variables – agriculture, mining, construction
Plant and organization – size of customer’s plant, degree of automation, age and
Competition – degree of competition, ease of entry
Purchasing – decentralized v/s centralized purchasing
End users – residential/commercial, bank/insurance houses.
Micro segmentation variables- These consider internal factors of the firm such as
Purchasing situation – New tasks, modified or re buy
Purchasing policies – How prices are determined, bids
Purchasing criteria – Suppliers reputation technical services, reliability,
Buying center – Key decision maker
Power structure – Collaboration, compromise, avoidance
Product segmentation may also be done on the basis of
Customer dispersion which refers to the number of customers in a market and the market
is allocated among them. Some consumers may be concentrated in some areas than in
The size of the customer which may be small, medium or large
Type of industry – construction, agricultural service
Product characteristics which consider type of material, such as heavy equipments, light
duty equipment and so on. Product characteristics may also include nature of product
consumption, which may be light, medium or heavy use.
Benefit derived, which considers the problem that the product solves or gives to
Behavior of the customer – whether or not a firm buys a product and frequency of use.
This involves evaluating and selecting one or more market segments to enter. This should be
based on their current use, their potential for future growth, competitor’s strength and so on. The
segment should be large enough to provide good market and should have good potential for
growth. In approaching the target segment, one can use several criteria, which include:
1. Current segment size. It is very important to consider the size of the market, because this
has a bearing on the customer base. The concern should not just be the number of
customers in a segment, but their sizes as well, the volume of purchases made by each
customer and the frequency of purchases.
2. Potential competition. This is important, because it will dictate the intensity of
competition to be experienced by the firm, either now or in the future.
3. Compatibility with company goals. The target segment should be compatible with the
goals of the firm. Market practices in the target segment should not be at variance with
those of the firm, otherwise there will be conflicts.
4. Undifferentiated marketing. The firm ignored segment differences and develops a single
marketing program common to all buyers within the market
There are four main types of targeting, namely differentiated marketing, undifferentiated
marketing, concentrated marketing and niche marketing. In differentiated marketing, the firm
offers a product to a number of different segments whose needs, product usage or responses are
significantly different. For instance, some may be heavy consumers, while others are light
consumers. Undifferentiated marketing involves offering a product to a number of different
segments whose needs, product usage or responses are not significantly different. On the other
hand, concentrated marketing is a situation in which a firm chooses to concentrate on one or a
few markets due to limited resources. Finally, niche marketing is a situation in which a firm
segments the market into fines, more homogenous clusters than that which is normally
approached traditionally. This enables an organization to provide products to buyers who are
seeking specially tailored products to suit their needs.
Positioning is process by which a company establishes an image for its product in the minds of
consumers relative to the image of the competitor’s product offering. It is the distinct place that
a product occupies in the minds of the target customers with respect to competing products. It
has to do with building a positive image or perception about a company’s product and services.
This should be best on specific product attributes as distinct from those of competitors. Product
positioning follows segmentation and targeting and aims at creating a positive image about a
product among the selected segment. It is concerned with creating a marketing mix that is
appropriate to each market segment.
Subdivide market Identify one or a Come up with the most
to homogeneous few segments to appropriate market mix
Segments concentrate all that is more appealing
to consumers (products’
Fig. 6.1: Process of product positioning
in positioning a product, one must identify, the key features in a product that make people buy
that product. It may be the taste, durability, quality, and so on. This the feature that is
emphasized in marketing the product. Examples
– Kenya Airways on ‘the pride of Africa’
– Safari boots as ‘the shoes that says you know Africa’.