MARKET SEGMENTATION E.ANAND LECTURER BIET - MBA PROGRAMME, DAVANGERE
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MARKET SEGMENTATION
E.ANANDLECTURER
BIET - MBA PROGRAMME, DAVANGERE
NATURE OF MARKET SEGMENTATION
BASIC CRITERIA: Market and its specific segments must be
Measurable: Information on location and other characteristics of buyers must be available.
Substantial / Significant: The given market or the market under study must be sufficiently large in size and should have like future potential too.
Stable:This means that customers have staying power and that a relationship can be established between supplier and clients.
NATURE OF MARKET SEGMENTATION
Accessible: This means that supplier can retain old customers and pinpoint new ones.
Compatible: It is the degree of similarity between buyer and seller in terms of risk taking, service standards and corporate style.
Ex: Tata Automobiles (Tata buses)
Private SectorBy type of Organization
• Companies• Proprietors• Partnership Companies
By type of Sector• Manufacturing• Service • Primary - Ex. Mining
Public SectorBy levels
•Central Government Departments
•State Government Departments
•Central Government Controlled Organizations
•State Government run organizations
Institutions
•Non Governmental Organizations
•Social Welfare Organizations
•Educational Institutions•Research Centres•Associations
Large Medium & Small Large Medium
& Small Large Medium & Small
Civil Defence
Size of Operation
Sector or Industry
Global Presence of Tata Automobiles
BASES FOR SEGMENTATION“THE FIRST STEP IN ANALYZING INDUSTRIAL MARKET IS TO DIVIDE IT....”
Is there a single route for segmentation like (location wise) or dual bases (location and sector) or multiple bases (industry, size and order etc.)
Is there a ideal or fixed selection of base for segmentation?
Most of the organizations segment on two bases: Location & Sector as it is easy to segment on these two bases.
NESTED LOOP APPROACH TO SEGMENTATION
Personal Characteristics
• Motivation• Buyer/Seller Relationship• Risk Perceptions
Situational Factors
• Urgency• Application • Size of Order
Purchasing Approaches
• Organization of Decision-making unit• Purchasing Policies• Purchasing Criteria
Emporographics
• Industy• Size of the Company• Location
Operating Variables
• User-Nonuser Status• Customer Capabilities (Financial)• Technology
General, Observable,
Objective (MACRO)
Specific, Subtle, Subjective (MICRO)
Intermediate
MACRO BASES (EMPOROGRAPHICS)Emporographics is to Industrial markets as Demographics is to Consumer markets. Emporographics encompasses macro bases - Size of buying unit, Type of industry and Location.
SIZE OF BUYING UNIT
- Which companies get maximum coverage in newspapers, BW 500, BT 500
- Globally Fortune 500 companies
- Turnover exceeding 50 crores are considered as Large companies in India
- Turnover not exceeding 50 crores are considered as Small & Medium size companies
- Giant companies are recognized by their huge employee population, physical assets and sales
- Medium & small size companies always try to supply wide variety of goods and services to Large companies
- These finally divest or else get merged into large ones or bought by large companies
- Small vendors supply to large and medium size companies even though there is less compatibility
- Small companies usually prefer business deals with companies of similar size
- These small companies usually can be referred to Business directory of the city
TYPE OF INDUSTRY
CONFEDERATION OF INDIAN INDUSTRY (CII)
TYPE OF INDUSTRYSECTORS AS MENTIONED BY FICCI - FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTY
! Advertising & Marketing, ! Apparel, ! Agriculture, ! Art and Business of Art, ! Aviation, ! Banking &
Financial Institutions, ! Biotechnology, ! Brand Protection, ! Capital Goods, ! Capital Market,
Communication & Digital Economy, ! Chemicals, ! Corporate Laws & Governance, ! Convergence, ! CSR &
Community Development, Defence, E-Business, Education, !Electronics Hardware, !Entertainment, ! E n v i r o n m e n t , !
Food Processing, ! Foreign Trade, ! FICCI Boating Forum, ! FICCI Trade Facilitation Forum, FICCI Young Leaders
Forum, ! Financial Inclusion, ! FMCG, ! Food Processing, ! Foreign Trade, ! Gems and Jewellery, ! H e a l t h , !
HRD, ! Hydrocarbons, ! Health Services, !Higher Education, Information Technology, ! Infrastructure, ! Insurance &
Pensions, ! Intellectual Property Rights, !Innovation, ! Labour, Employment, Skill Developments, ! Lifestyle
Forum, Logistics, ! Manufacturing, ! Mining & Minerals, ! Non-conventional Energy, ! Pharmaceuticals, !
Power, ! Real Estate, ! Resource Conservation & Management Group, Retail, Rural Development, ! Renewable
Energy, ! Science &Technology / Innovation, ! Small and Medium Enterprises (SME), ! Sports, ! Taxation, !
Telecom, ! Tourism, ! Urban Development, ! Working Group on Civil Nuclear, Water Resources
TYPE OF INDUSTRYNIC INDUSTRY CODE - 1998 & http://mospi.nic.in/nic_1998.htm
TYPE OF INDUSTRYNIC INDUSTRY CODE - 1998 & http://mospi.nic.in/nic_1998.htm
TYPE OF INDUSTRYNIC INDUSTRY CODE - 1998 & http://mospi.nic.in/nic_1998.htm
GEOGRAPHIC LOCATIONPinpoint the resources or facilities of a given industry. Like identify where are mills, mines, offices etc. where your product can be sold.
Location of industries would vary from resource(raw materials)-centric industries to customer-centric industries. Location of industry depends on which stage the material is in the processing of it?
ADB or WB sites give lot of information - region-wise (best sources for identifying regions of your interest). Knowing which mineral is mined in which area would be useful data.
COMBINING SIZE, LOCATION & INDUSTRYIBM has identified several small businesses which might use their products and services.For textiles - which area would you target?
Can you do segmentation for:
i) Asian Paints ii) HP productsiii) Helicopter company which is planning to start selling in India.
THE INTERMEDIATE BASES FOR SEGMENTATIONOPERATING VARIABLES
USAGE RATE
Segmentation of clients on the bases of usage occurs along the following lines: Heavy, Moderate and Light users.
Challenge is to retain heavy users while targeting light users
OEMs or After-market?
Predict the future scenario too - software or hardware?
CUSTOMER CAPABILITY Develop long-trusting bond - Will lead to future straight buys But never forget that modified rebuys and New task gives you a chance to become first-time suppliers Tenders are notified to all the preferred buyers. So trust becomes important to establish
TECHNOLOGY
Be the first to understand the technical requirements of your client Americans - breakthrough technologies while Japanese - steady improvement in technologies Intel Vs AMD
PURCHASING APPROACHESPURCHASING POLICIES AND PRACTICES
While some buyers plan their purchase, why do others postpone till last minute? Which departments are actually interested in investigating the specifications, bid invitations, supplier selection? Purchasing policies differ according to industry, according to countries, regions. Agricultural industry’s purchasing policies would be different from manufacturing industry’s policies. Vendor must obtain documentation than oral understanding regarding gift giving, the way in which bids are processed etc. Do they believe centralized purchasing or decentralized ? Do they believe system solution or part solution (assembly line)
PURCHASING CRITERIA
Whether it is prompt delivery, price, follow-up service or quality products? For prompt delivery which delivery service the client is using FedEx., United Parcel Service, DHL, TNT etc.? The criteria varies according to the country too. Canadians like prompt quotation, delivery reliability while Brits like having testing facilities near them, delivery reliability. Few companies in the same industry look for technical support while few companies look for service support
SERVICE LEVEL
Although price is major consideration, many companies also require services issues like reliability, ability to obtain emergency deliveries, quality of technical assistance More the service sought by companies, more is the necessity that you have to stay near your clients placeEx: Tata nano.
SITUATIONAL VARIABLES
Three important situational considerations are
Urgency Application Size of the order
Whether client needs standardized solution or a customized solution? Ex. Biometric solutions
MICRO BASES FOR SEGMENTATIONWhy Business Clients Switch Vendors?
Various circumstances why business buyers switch vendors:
Dissatisfaction with existing vendor’s quality, service or price Retirement, transfer, resignation or death of a key contact Changes in requirement - now requires totally different material In times of turbulence - Ex. recession, inflation, shortages etc. because of pressure of cost cutting, corporate downsizing, outsourcing etc.
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Types of Buyers
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse
Types of Buyers
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
Shop around for vendors
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
Shop around for vendors A t t e n d m a n y t r a d e s a n d
exhibitions to catch good vendors
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
Shop around for vendors A t t e n d m a n y t r a d e s a n d
exhibitions to catch good vendors Look for good vendors
INDIVIDUAL CHARACTERISTICSBACKGROUND, FUNCTION & RESPONSIBILITY LEVEL
Risk Averse Risk Receptive
Types of Buyers
Not good for new products and new concepts They tend to avoid untested
vendors They can rely on old friends and
colleagues to be vendor
Shop around for vendors A t t e n d m a n y t r a d e s a n d
exhibitions to catch good vendors Look for good vendors Initially split up orders between
vendors and then select few
REASSEMBLING THE NEST
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITY PERMANENCE INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITY
PERMANENCE INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITY
PERMANENCE INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITY
PERMANENCE INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITY
PERMANENCE
INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCE
INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCE
INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCE
INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCE
INTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCEINTIMACY
REASSEMBLING THE NEST
Situationalfactors
Personal Character
istics
Company VariablesDemographics
Purchasing Approaches
PurchaseProcess
PurchaseDecision
VISIBILITYPERMANENCEINTIMACY
FOUR OUTCOMES OF SEGMENTATION
NO SEGMENTATION
SUPERFICIAL SEGMENTATION
OBTUSE, CONVOLUTED AND DISORGANIZED SEGMENTATION
AFTER-THE-FACT SEGMENTATION
MISAPPLICATIONS OF SEGMENTATION
Over concern with demand level - paying attention only to large scale industries and less to small scale industries. Similarly paying attention to current users and neglecting potential users
Needless searching for identification - Searching for proper classification of location, industry or size of the organization
Myopic views of product forms - Do think beyond the actual use of your product (Ex.Washing machines for Punjabi Dhabas)
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