Basis for Segmenting Business Markets

Business markets need to be segmented like consumer markets geographically or by benefits sought, user status, usage rate, and loyalty status. Some additional variables are also used for segmenting business markets.

These are Business Market Segmentation bases;

• Customer demographics (industry, company size),
• Operating characteristics,
• Purchasing approaches,
• Situational factors, and
• Personal characteristics.

Retention based:

Risk of customer cancellation of company service

One of the most common indicators of high-risk customers is a drop off in usage of the company’s service. For example, in the credit card industry, this could be signaled through a customer’s decline in spending on his or her card.

Risk of customer switching to a competitor

Many times customers move purchase preferences to a competitor brand. This may happen for many reasons those of which can be more difficult to measure. It is many times beneficial for the former company to gain meaningful insights, through data analysis, as to why this change of preference has occurred. Such insights can lead to effective strategies for winning back the customer or on how not to lose the target customer in the first place.

Customer retention worthiness

This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer and includes evaluation of customer lifecycles.

Different Buyer:

Relationship Buyers: These buyers regard Signode’s packaging products as moderately important and are knowledgeable about competitors’ offerings. They prefer to buy from Signode as long as its price is reasonably competitive. They receive a small discount and a modest amount of service. This segment is Signode’s second most profitable.

Programmed Buyers: The buyers view Signode’s products as not very important to their operations. They buy the products as a routine purchase, usually pay full price, and accept below-average service. This is a highly profitable segment for Signode.

Transaction Buyers: These buyers see Signode’s products as very important to their operations. They are price and service sensitive. They receive about a 10 percent discount and above ­average service. They are knowledgeable about competitors’ offerings and ready to switch for a better price, even if it means losing some service.

Bargain Hunters: These buyers see Signode’s products as very important and demand the deepest discount and the highest service. They know the alternative suppliers’ bargain hard and are ready to switch at the slightest dissatisfaction. Signode needs these buyers for volume purposes, but they are not very profitable.