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Engineering Economics & Management Sub : Market segmentation & Basis to segment Industry/Business Market Branch : Computer Eng. Sem : III Shree Swami Atmanand Saraswati Institute of technology Submitted To: Prof. Vidita vithalani Prof. Vijay Radadiya Submitted By: Kapadia Shivani Makvana Kinjal Malaviya Neelam Patel Monika Nakrani Dharti (130760107016) (130760107017) (130760107018) (130760107019) (130760107020) Market segmentation “Dividing a market into distinct groups of buyers who have different needs, characteristics or behaviors and who might require separate products or marketing programs” EXAMPLE MARUTI UDYOG LIMITED is providing different models such as 800, Alto, Zen, Wagon R, Versa, Esteem,..Etc. to provide variety to the different customer segment. IMPORTANCE OF MARKET SEGMENTATION As markets mature, competition becomes more intense Customers have more varied needs and desires Technology — micro-segmentation and relationship marketing Identifies opportunities for new product development Helps design of effective marketing programs Improves strategic allocation of marketing resources MARKET SEGMENTATION LEVELS Segment marketing Individual marketing Niche marketing Segment Marketing Individual Marketing Niche Marketing Local Marketing Local marketing BASIS FOR SEGMENTATION A] BASIS FOR SEGMENTING CONSUMER MARKET B] BASIS FOR SEGMENTING BUSINESS/INDUSTRY MARKET BASIS FOR SEGMENTING BUSINESS/INDUSTRY MARKET 1] Demographic Industry Company size Customer location 2] Operating variables Company Technology Customer capabilities 3] Purchasing approaches Organization's Power purchasing function structures Relationships General among the buyers and sellers purchasing policies 4] Situational factors Urgency Product Size of order fulfillment application of the order 5] personal characteristics of the purchasers Buyer seller similarity Attitude toward loyalty risk BASIS FOR SEGMENTING BUSINESS Demographic Operating variables Purchasing approaches Situational factors personal characteristics of the purchasers 1] Demographic Demographics is the simplest method to segment organizational markets. Industry Knowledge of certain industries can help marketers segment their market. The needs of different industries are different. Therefore, their purchasing patterns also different. Ex: The financial services industry is one, single industry. But for marketing computers and related services, it can be further subdivided into smaller segment such as insurance firms, bank and so on. Company Size For instant , a small manufacturing of chemicals can segment his prospective buyers on the basis of their size. He will prefer to target small companies, because he will be able to fulfill their requirements of larger companies may be more than his installed capacity, which is why he does not target them. Customer Location This type of segmentation is variable for industries on which proximity is critical for carrying out business activities. Ex Industries that manufacture low value per unit weight or volume of products, in which personal services are required. 2] Operating variables Company Technology An organization’s purchasing requirements are affected by the technology it uses in its manufacturing process to produce its products. Ex The production process to manufacture color TVs in Japan is automated, Japanese manufactures use few integrated circuits, while the same process in US once required discrete components, manual assembly, etc. Customer capabilities Customers requirements depend on their capabilities in various fields. Ex For instance, automobile producers such as Toyota maintain just-in-time inventory & therefore, they depend on suppliers who have excellent delivery records or on whom they can rely for consistent and reliable supply of raw materials. 3] Purchasing approaches Organization’s Purchasing Function One may follow a centralized purchasing structure while others may follow a decentralized one. So, a supplier should devise strategies to deal with such differences. Some suppliers maintain national sales accounts to deal with companies following a centralized purchasing method and maintain local sales account to deal with companies that follow a decentralized purchasing method. Power structures The strength of the financial analysis unit of General Motors has made it stronger in getting better deals from its suppliers. Therefore, suppliers can segment their customers on the basis of the level of impact of influential units of organization. Relationships among the buyers and sellers With some customers it will be a stronger, while with others, it may not be as good. Organization can clearly demarcate their relationship with different customers. Ex A bank can find companies which have representatives of competitors on their boards, an unattractive segment. General purchasing policies Some buy while others get them on lease. Similarly, some organizations have a policy of buying systems rather then individual components. Government organizations usually buy through bidding. Therefore, suppliers who have a comparative cot advantage may prefer to target such markets. 4] Situational factors Urgency of order fulfillment Marketers can differentiate their customers on the basis of products that are to be used on a regular basis, products that are needed for urgent replacement of exiting parts, etc. Customers who want quick supplies are usually ready to pay higher prices. Product application The application of the products and its usage also help in segmenting industrial markets. Ex A computer in a software development used continuously for 18 hours a day, while it may be used for just two or three hours in the computer lab of a school. Size of the order A supplier with a highly automated manufacturing process may depend on sales volumes, while a non – automated manufacture may depend on small quality, short run products. Marketers can divide the market on the basis of the product users and their usage patterns, since customers may order products from different suppliers for the same products for different requirements. 5] personal characteristics of the purchasers Buyer seller similarity Purchase decisions in organization are made by individuals and not the organizations, although the philosophies and procedures of the organizations provide them with a framework and restrict the purchasing patterns. Attitude toward risk The risk taking and risk averting nature of a buyers normally do not look for new suppliers. But some buyers look for several suppliers for their requirements and split their orders in such way that on time delivery is ensured. loyalty Some Customers depend on their exiting suppliers and loyal them. Such customer preferences act as a guide for segmenting these markets. However it is difficult to obtain data on personal characteristics, but the company’s sales force can be effectively used for gathering such information.