BM Four

CHAPTER FOUR
SEGMENTATION, TARGETING AND POSITIONING (STP)

IN
INDUSTRIAL MARKETING
Chapter objective
Identify General Market Segmentation Strategy
Analyze Market Strategies For Business Segmentation
Identify Approaches To Market Segmentation

Discuss Product Positioning Strategy
1
Chapter Overview
Market segmentation has long been considered among the most

fundamental concepts of marketing.
The goal of segmentation in an industrial setting is the same as
that in a consumer product environment to divide larger markets
into smaller components that are homogeneous with respect to
their response to a market mix. To be successful, the business
marketer must:
 Identify, analyse, and evaluate potentially attractive market
segments;
 Target the segments to serve; and then
 Develop & communicate a positioning strategy
2
4.1 GENERAL MARKET SEGMENTATION STRATEGY
;
•MARKETANALYSIS
Developing a better understanding of the total market place
•MARKET SELECTION
A rational choice of market segments
•MARKETING MANAGEMENT
Developing strategies, policies, and programs to meet the needs of different
market segments profitably and to give the company a distinct competitive
advantage.
Business-to business firms vary in needs and wants, size, economic
activities, procurement structure, and location.
Marketing segmentation links market needs to an organization’s marketing actions
Identify market needs

Benefits in terms of: Process of Take marketing actions
A marketing program in
Product features Segmenting and Terms of:
Expense quality targeting Product
Savings in time and Markets Price
convenience Place and
3
Promotion
4.2 MARKET STRATEGIES FOR BUSINESS SEGMENTATION
Business marketing managers must determine what strategy to use for different
market segments.
Three alternative market-selection strategies are:
• UNDIFFERENTIATED MARKETING
STRATEGY
An undifferentiated marketing strategy uses
the concept of “market aggregation”, wherein
the total market is treated as one
homogeneous market segment.
• DIFFERENTIATED MARKETING STRATEGY
A differentiated marketing strategy attempts to
distinguish a product from competitive products
offered to the same aggregate market.
1. Product modification costs
2. Production costs
3. Administrative costs
4. Inventory cost
5. Promotion costs
5
• CONCENTRATED MARKETING
STRATEGY
A firm using concentrated marketing strategy selects

one or a relatively few segments on which to focus all
its marketing effort.
Through concentrated marketing, the firm achieves
a strong market position in the segment because of
its greater knowledge of the segment’s needs.
Furthermore, the firm enjoys many operating
economies through specialization in its production,
distribution, and promotion functions. 6
4.3 APPROACHES TO MARKET
SEGMENTATION
1. Macro/micro segmentation
2. The nested approach to segmentation
3. Segmentation for maturing markets
4. Segmentation by purchase responsibilities of
individuals within organizations.
5. Other approaches to market segmentation
7
1. Macro/Micro segmentation
Macro segmentation involves dividing the market into subgroups based
on over all characteristics of the prospect organization:
•The size of buying units, Type of industry and Location
Micro segmentation, on the other hand, involves dividing the market

into subgroups based on specific characteristics of the decision-making
process and the buying structure within the prospect organization:
•Buying-center authority, Attitudes towards vendors, and so on
In either case, the business marketer identifies subgroups that share

common macro or micro characteristics and then selects target segments
from among these subgroups. 8
2. Nested approach
Thomas Bonoma and Benson Shapiro have developed a more

detailed approach to market segmentation that they refer to as a
nested approach.
In contrast, the nested approach stress segmentation according to

the amount of investigation required to identify and evaluate
different criteria.
Layers of the nest are arranged according to ease of assessment of

the information, beginning with organization demographics.
As illustrated, macro layers, or characteristics are outer most, and

micro characteristics are innermost in the exhibit. In other words,
more specific customer characteristics are nested inside the broader
organizational basis. 9
Exhibit : major potential bases for segmenting (nesting)
General observable
EMPOROGRAPHICS (organizational demographics)
•Industry
(Macro) •Company size
•location
OPERATING variables
•Technology
•User-nonuser status
•Customer capabilities (financial)
PURCHASING APPROACHES
•Organization of DMU
(Intermediate)
•Purchasing policies
•Purchasing criteria
SITUATIONAL FACTORS
•Urgency
•Application
•Size of order
PERSONAL
CHARACTERISTICS
•Motivation
Specific, subtle •Buyer- seller 1 to1
relationship
•Risk perceptions
(Micro) 10
Nested approach
THE MACRO BASE OF SEGMENTATION EMPOROGRAPHICS
(ORGANIZATIONAL DEMOGRAPHICS)
Size of buying unit:

Command resources
Type of industry:
The international level is the SIC (standard industrial classification)
code compare its sales data with existing statistics.
Geographic location:
Location Of Actual And Potential Customers
Planning Distribution Centers And
Promotional campaigns.
Combining size, industry, and location:

11
Macro bases such as those just discussed can be used singly, but such
emporographics prove to be more meaningful in combination..
Nested approach
THE INTERMEDIATE BASES FOR SEGMENTATION
•SITUATIONAL
•
•PURCHASING VARIABLES
OPERATING
APPROACHES Situational
VARIABLE variables are closely
• Purchasing policies and related to operating and
•User status purchasing variables on
•Customer capabilities practices
the one hand and to the
•Technical features • Purchasing criteria
micro bases of team and
• Service level individual buyer
characteristics on the
other.
12
3. Segmentation for maturing markets
Categories of segmentation Segmentation variables

Types of economic activity  Agriculture, forestry, fisheries
 Mining
 Construction
 Manufacturing
 Transportation
 Communication
 Wholesale trade
 Retail trade
Size of organization  Number of establishments

 Number of employees
 Volume of shipments
 Annual sales
Geographic location  Global regions

 Nations
 National regions
 States
 Counties
 Cities
 Neighborhoods
 Climate
 Territory
 Population density
Product usage  How used

 Usage rate
Structure of the procurement function  Centralized

 Decentralized
13
 Buyer center
 Buyer situation
4. Segmentation by purchase responsibilities of individuals within organizations .
 as a basis for segmenting business

markets
 a valid approach to segmentation.
 may lead to more effective
deployment of marketing
resources.
 an attempt to reduce some of the
complexity involved in
understanding the concept of the
buying center 14
5. Other approaches to market segmentation
 Many of the variables generally used by the

marketer to segment the consumer market also can
be used by the business marketer to segment the
organizational market (for example, user status,
degree of customer loyalty, and customer attitude
toward the product).
15
Evaluating potential market segments
1. Market profitability analysis

porter’s five forces i.e.
Industry competitors,
Potential entrants,
Substitutes,
Buyers and Suppliers
that determine the intrinsic long-run
attractiveness of a whole market, or any segment
within it.
16
2. Market competitive analysis
 The basic criteria
Measurable: specific information about the size and expenditures
and characteristics of any segment can be determined through primary or
secondary research.
Substantial: large enough to justify a firm’s expenditures of
manpower and capital.
Accessible: the segment must be accessible. The firm must be able to reach the
segment through marketing efforts.
Differentiable: it is homogeneous within and heterogeneous between.
Stable: a supplier can retain old customers and pinpoint new ones.
Compatible: shows degree of similarity between sellers and buyers in regard to risk
taking, service standards, and corporate style.
17
4.4 PRODUCT POSITIONING STRATEGY
Business marketers must carve a position or niche for their

respective products in the minds of prospective customers
 APPROACHES TO POSITIONING
 Technology
 Quality
 Price
 Distribution
 Image and
 Service
18
THANK YOU!
19

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CHAPTER FOUR

SEGMENTATION, TARGETING AND POSITIONING (STP)

Analyze Market Strategies For Business Segmentation

Identify Approaches To Market Segmentation

Market segmentation has long been considered among the most

Marketing segmentation links market needs to an organization’s marketing actions

Identify market needs

Three alternative market-selection strategies are:

A firm using concentrated marketing strategy selects

Micro segmentation, on the other hand, involves dividing the market

In either case, the business marketer identifies subgroups that share

Thomas Bonoma and Benson Shapiro have developed a more

In contrast, the nested approach stress segmentation according to

Layers of the nest are arranged according to ease of assessment of

As illustrated, macro layers, or characteristics are outer most, and

Size of buying unit:

Combining size, industry, and location:

Categories of segmentation Segmentation variables

Size of organization  Number of establishments

Geographic location  Global regions

Product usage  How used

Structure of the procurement function  Centralized

 as a basis for segmenting business

 Many of the variables generally used by the

1. Market profitability analysis

Business marketers must carve a position or niche for their

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