Segmenting Business Markets – Valutrics

Business markets can be segmented with some of the same variables used in consumer
market segmentation, such as geography, benefits sought, and usage rate, but business
marketers also use other variables.  The demographic variables are the most
important, followed by the operating variables—down to the personal characteristics of
the buyer.
The table lists major questions that business marketers should ask in determining which
segments and customers to serve. A rubber-tire company should first decide which industries it wants to serve. It can sell tires to manufacturers of automobiles, trucks, farm tractors,
forklift trucks, or aircraft. Within a chosen target industry, a company can further segment
by company size. The company might set up separate operations for selling to large and small customers.

Within a given target industry and customer size, a company can segment by purchase
criteria. For example, government laboratories need low prices and service contracts for sci-
entific equipment; university laboratories need equipment that requires little service; and
industrial laboratories need equipment that is highly reliable and accurate.
Sequential Segmentation
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 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 cus-
tomers. The second stage consisted of microsegmentation. The company distinguished
among customers buying on price, service, or quality. Because the aluminum company
had a high-service profile, it decided to concentrate on the service-motivated segment of
the market.
Business buyers seek different benefit bundles based on their stage in the purchase decision process:
1. First-time prospects – Customers who have not yet purchased but want to buy from a vendor who understands their business, who explains things well, and whom they can trust.
2. Novices – Customers who are starting their purchasing relationship want easy-to-read
manuals, hot lines, a high level of training, and knowledgeable sales reps.
3. Sophisticates – Established customers want speed in maintenance and repair, product
customization, and high technical support.

These segments may also have different channel preferences. First-time prospects would
prefer to deal with a company salesperson instead of a catalog or direct-mail channel,
because the latter provides too little information. Sophisticates, on the other hand, may
want to conduct more of their buying over electronic channels.
One proposed segmentation scheme classifies business buyers into three groups, each
warranting a different type of selling:
• Price-oriented customers (transactional selling). They want value through lowest price.
• Solution-oriented customers (consultative selling). They want value through more benefits and advice.
• Strategic-value customers (enterprise selling). They want value through the supplier co-
investing and participating in the customer’s business.
The authors cite several cases of mismanagement by companies that did not understand
the business buyer:
• A packaging manufacturer decided to upgrade and rename sales reps as packaging consultants at a cost of $10 million, but 90 percent of its customers bought transactionally. The company failed and was acquired by a major competitor who reintroduced a transactional selling effort.
• A consulting firm replaced its long-term consultants with salespeople to sell quick consulting projects. They acquired many new clients but lost most of their old clients, who wanted consultative selling.
• A container manufacturer selling consultatively to a major food company was asked to
join in some risk and gain sharing involving co-development of radically new packaging
approaches. It refused and lost the account.