...Market Segmentation in B2B Markets Written by Paul Hague and Matthew Harrison Satisfying people’s needs and making a profit along the way is the purpose of marketing. However, people’s needs differ and therefore satisfying them may require different approaches. Identifying needs and recognising differences between groups of customers is at the heart of marketing. What Is Marketing If It Is Not About Segmentation? CVS Pharmacy is one of the most successful drug store chains in America. What is the reason for this success? They understand their market and have approached it through segmentation and targeting. The company looked at its customer base and found that 80 percent are women. With this in mind, CVS redesigned 1,200 of its 6,200 stores to meet the needs of busy, multi-tasking women by offering shorter wait times for prescriptions, wider and better-lit shopping aisles, and more beauty products. In doing so it fulfilled the requirement of all good marketing orientated companies – it identified the needs of its customers and organised its offer to better meet them. This is at the heart of all good marketing – meeting customers’ needs profitably, and allocating finite resources in such a way that profit is maximised. This means not wasting time or resources on customers who would be less profitable, and treating the key targets not as one homogenous population but as distinct groups with distinct needs. It is very rare for even two customers to have identical needs to...
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...Ch11-H8566.qxd 8/8/07 2:04 PM Page 222 CHAPTER 11 Market segmentation YORAM (JERRY) WIND and DAVID R. BELL All markets are heterogeneous. This is evident from observation and from the proliferation of popular books describing the heterogeneity of local and global markets. Consider, for example, The Nine Nations of North America (Garreau, 1982), Latitudes and Attitudes: An Atlas of American Tastes, Trends, Politics and Passions (Weiss, 1994) and Mastering Global Markets: Strategies for Today’s Trade Globalist (Czinkota et al., 2003). When reflecting on the nature of markets, consumer behaviour and competitive activities, it is obvious that no product or service appeals to all consumers and even those who purchase the same product may do so for diverse reasons. The Coca Cola Company, for example, varies levels of sweetness, effervescence and package size according to local tastes and conditions. Effective marketing and business strategy therefore requires a segmentation of the market into homogeneous segments, an understanding of the needs and wants of these segments, the design of products and services that meet those needs and development of marketing strategies, to effectively reach the target segments. Thus focusing on segments is at the core of organizations’ efforts to become customer driven; it is also the key to effective resource allocation and deployment. The level of segment aggregation is an increasingly important issue. In today’s global economy,...
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...Segmentation in B2B Markets A White Paper by Paul Hague and Matthew Harrison of B2B International WHAT IS MARKETING IF IT IS NOT ABOUT SEGMENTATION? CVS Pharmacy is one of the most successful drug store chains in America. What is the reason for this success? They understand their market and have approached it through segmentation and targeting. The company looked at its customer base and found that 80 percent are women. With this in mind, CVS redesigned 1,200 of its 6,200 stores to meet the needs of busy, multi-tasking women by offering shorter wait times for prescriptions, wider and better-lit shopping aisles, and more beauty products. In doing so it fulfilled the requirement of all good marketing orientated companies – it identified the needs of its customers and organised its offer to better meet them. This is at the heart of all good marketing – meeting customers’ needs profitably, and allocating finite resources in such a way that profit is maximised. This means not wasting time or resources on customers who would be less profitable, and treating the key targets not as one homogenous population but as distinct groups with distinct needs. It is very rare for even two customers to have identical needs to each other. In a perfect world, we would identify those customers that we deem to be profitable, and then treat each one of those individually according to their unique needs. In any market with a sizeable target audience, even this is likely to require more resources...
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...MARKETING ENGINEERING FOR EXCEL • CASE • VERSION 2.0.3 Case ABB Electric Segmentation By Gary L. Lilien & Arvind Rangaswamy 1. Before beginning any case, students should familiarize themselves with the model being used. Marketing Engineering for Excel comes with tutorials that demonstrate the capability of each model. The tutorial can be found under each model within the ME►XL menu after starting Excel. These tutorials are designed to work with our OfficeStar examples which are located in the My Marketing Engineering directory, usually installed in My Documents during software installation. The data required for this case is located in the My Marketing Engineering directory (usually located within My Documents): ABB Electric Data (Customer Choice).xls 2. ABB Electric History In March 1970, ABB Electric was incorporated as a Wisconsin-chartered corporation with initial capital provided by ASEA-ABB Sweden and RTE Corporation. The new firm’s management was to operate independently of the parent company. The company mission was to design and manufacture a line of medium-sized power transformers to market in North America. The firm produced such electrical equipment as transformers, breakers, switchgears and relays used in distributing and transmitting electrical energy. Four main types of customers buy this electrical equipment: (1) investor-owner electrical utilities (IOUs), the largest segment; (2) rural electrification cooperatives (RECs); (3) municipalities;...
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...Organizations employ individualized segmentation approaches to modify their marketing programs in ways that allow them to match customers' needs, wants, and preferences. This is all possible due to advances in communication and internet technology. Today, organizations can track customers with a high degree of detail. There are many benefits associated with individualized segmentation. For example, permission marketing consists of customers giving companies permission to specifically target them in their marketing efforts, which are most commonly emails. This is a benefit because companies are able to send the marketing material directly to an interested customer, and the customer is exposed to the latest products and sales of their favorite companies. Additionally, individualized segmentation allows for firms to best fulfill the needs or solve the problems of the...
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...| MARKETING FOR A NON-PROFIT ORGANIZATION By: Ahmed Alhalal, Charles Hazzard, Dreu dixon, Faisal Al Mubayedh, Kelly Walker April 11, 2013 Introduction to Engineering Management- 2111-001 MARKETING FOR A NON-PROFIT ORGANIZATION By: Ahmed Alhalal, Charles Hazzard, Dreu dixon, Faisal Al Mubayedh, Kelly Walker April 11, 2013 Introduction to Engineering Management- 2111-001 | EXECUTIVE SUMMARY At the start of this project, our team was given a special opportunity to develop a hands-on marketing project with a non-profit organization. This non-profit organization goes by the name of The Lightfactory, and is known as one of four museums of photography and film in the United States. The board of directors requested our team to develop an e-mail campaign strategy to improve membership and donor rates. However, as systems engineers, none of our team members had any prior knowledge of marketing or segmenting. Therefore our team was forced to do some extensive research on non-profit marketing, as well as database segmenting. The ideals and concepts learned throughout the research process were eventually used as a foundation for completing the project objectives proposed by the Lightfactory board of directors. Segmenting the database was a success and provided some key insights about the LightFactory’s customer base. Most of the customer’s in the database were segmented into three major populations: Big givers, Middle givers, and Low givers. These segments are customers...
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...Why Segmentation? Introduction and Definition When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Literature suggests the following steps: Adapted from Kotler and Doyle The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. Definition: Market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that differences between buyers within each segment are as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix. Criteria for Market Segmentation There are a huge number...
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...Choice Modeling: Marketing Engineering Technical Note 1 Table of Contents Introduction Description of the Multinomial Logit (MNL) Model Properties of the MNL Model S-shaped response function Inverted “U” Marginal response Elasticity of response Proportional Draw Logit Model Estimation via Maximum Likelihood Using Logit Models for Customer Targeting Using Logit Models for Customer Segmentation Determining the number of latent segments in MNL models Summary References Introduction Firms today have access to increasing amounts of market response data at the level of individual customers, including data from scanner panels, direct marketing efforts, online retailing, loyalty programs, and the like. These data include both the marketing effort directed at a customer (e.g., price discount, or specific email sent to that customer) and the associated specific behaviors (e.g., purchase, customer support) of that customer. Consequently, there is also increasing interest among marketers in developing and using response models specified at the individual level. Analyses of individual-level data are useful for firms even for making decisions about aggregate marketing actions, such as TV advertising. After all, markets are composed of individuals, and acknowledging This technical note is a supplement to the materials in Chapter 1,2, and 7 of Principles of Marketing Engineering, by Gary L. Lilien, Arvind Rangaswamy, and Arnaud De Bruyn (2007). © (All rights reserved) Gary L. Lilien...
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...-1- Why Segmentation? Introduction and Definition When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Literature suggests the following steps: Market Segmentation 1. Identification of customers‘ needs and market segments 2. Develop profiles of resulting market segments Positioning 5. Identification of differential advantages in each segment 6. Development and selection of positioning concepts Identification of Target Markets 3. Evaluation of attracti vity of each segment 4. Selection of target segments Marketing Planning 7. Development of a marketing mix for each segment according to the chosen position Adapted from Kotler and Doyle The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. Definition:...
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...millions to transmit data at the same time. * Understand the importance of standards (protocols) * What problems are and tasks are involved in networks and why are standards important for networks to run? Computers and applications of different kinds need to use the same network. Packets could get altered/lost/out of sequence. Many computers send packets simultaneously. There are lots of different destinations, routes, and sometimes some of them ‘close down’. * Bandwidth Bandwidth is transmission capacity of a computer or communications channel, measured in bits per second (bps). * TCP/IP protocol and layered standards of the Internet * Application layer, network layer (TCP/IP) Applications layer (e.g. HTTP, FTP) specifies how application programs communicate. Network layer (e.g. TCP/IP) consists of transport layer and internet layer. Transport layer (TCP) breaks, reassembles messages into packets. Internet layer (IP) specifies the address a packet is headed to. * Internet addressing and architecture: means to finding stuff * Describe the major parts of a URL and implications of URLs and domain names URL (Uniform Resource Locator) is means of identifying files on the web. “Application transfer protocol://host name.domain name.top-level domain/path/file” Domain name is the unique name assigned to an IP address. * Describe how DNS works DNS is a distributed database of...
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...1 Defining Marketing for the 21st Century Chapter Questions Why is marketing important? What is the scope of marketing? What are some fundamental marketing concepts and new marketing realities? What are the tasks necessary for successful marketing management? Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2 What is Marketing? Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 What is Marketing Management? Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 4 What is Marketed? • Goods • Events • Services • Experiences • Persons Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5 What is Marketed? • Places • Properties • Organizations • Information • Ideas Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 6 Figure 1.1 A Simple Marketing System Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 7 Key Customer Markets Consumer markets Business markets Global markets Nonprofit/Government markets ...
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...HBR Article: Diamonds in the Data Mine March 31, 2010 By Gary Loveman This is a pretty nice and short yet highly effective article that outlines the importance of providing an exceptional customer service in today’s service industry, especially in the gaming industry as it is the case of Harrah’s Entertainment casino. Actually, from its inception, Harrah’s former CEO Phil Satre had instituted this policy of “changing Harrah’s from an operations-driven company that viewed each casino as a stand-alone business into a marketing-driven company that built customer loyalty to all Harrah’s properties”. In doing so, Satre asked Gary Loveman to head a strategy to affect this change in all Harrah’s organizations, and so Loveman did follow through on this task. He effectively focused on delivering customer service and on understanding and marketing effectively to the customer. This is the secret to Harrah’s success, which allows him and Harrah’s to maintain loyalty from its customers based on the database they had collected over the years, as they were able to identify their customers’ needs and wants as well as to have good reward and incentive programs in place to recognize their clientele according to the time and money they spend gambling over their facilities. Yet, for their workforce, Harrah’s instituted a bonus system tied to job satisfaction. “Rewards hinge on everyone’s performance at a casino- and on customer satisfaction, not a property’s financial performance”. Also...
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...* Stimulate demand | * Reminds and reinforce | * Introduce product and brands * Create brand image | * Communicate function/benefits of product | * Provide information * Persuade | * Build awareness of products and brands | * Can reach large audiences | | * Importance of Advertising: * Assist in communication, persuasion and interaction. * Helps to establish brand equity. * Used to build brand image/identity. Consumer Push and Pull Marketplace * Advertising has changed due to shifting media preferences & expenditure and the changing advertising agency structure. It has turned from a linear marketer controlled process into an interaction. * Strategies for consumer power online: * Control over relationship * Information as power * Aggregation * Participation * Push and Pull Model: * Push – “Taking the product to the consumer” * Pull – “Getting the consumer to come to you” New Rules of Engagement with Consumers New Rules of Engagement with Consumers Integrated Marketing Communication * Old Definition: A concept of marketing communications planning, that recognises the added value of a comprehensive plan, that evaluates the strategic roles of a variety of communication. * New Definition: Develop, execute and evaluate coordinated, measureable, persuasive brand communication programs overtime with consumers, customers, prospects, employees...
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...Market Segmentation Muhammad Khalid SUNY Empire State College What is Market Segmentation? The concept of market segmentation is quite simple. Common sense would dictate that every product, good, or service is not applicable to every potential consumer in both the national and global market. Different demographics categorize products differently. The idea of segmentation is to organize sub-markets with in the mass-market, evaluating which sub-market have a greater potential to buy the respective product or service. After research and testing, this market(s) is (are) known as the target market. The target market is quite simple to understand. It is simply the market or markets which maintain the potential for the most profitability for the firm or company. One question someone might ask is why choose to select a niche market as opposed to just targeting the mass market? The answer is simple: Marketing is expensive. Researching which demographic will best respond to the respective service or product ensures the company will only be exhausting resources where the potential for return in greatest. At the same time, markets where scope of success is limited will not consume valuable time, energy, money, brainpower, and overall company resources. How do Companies Segment Markets? The initial step to this process is to delineate the firm’s current situation. The role of this is to allow the company to evaluate its own standing prior to that of the markets. Here, strategies...
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...Solomon’s Chapter 1 1. Provide a definition of consumer behavior. 2. What are demographics? Give three examples of demographic characteristics. 3. What is the difference between a culture and a subculture? 4. Define market segmentation. 5. What is role theory, and how does it help us to understand consumer behavior? 6. What do we mean by an exchange? 7. Why is it important for businesses to learn about their heavy users? 8. What is database marketing? Give an example of a company that uses this technique. 9. What is popular culture, and how does this concept relate to marketing and consumer behavior? 10. The chapter states that “people often buy products not for what they do, but for what they mean.” Explain the meaning of this statement and provide an example. 11. Describe two types of relationships a consumer can have with a product. 12. What is meant by the term “global consumer culture”? 13. What is the difference between B2B and B2C e-commerce? 14. The economics of information perspective argues that advertising is important. Why? 15. Provide two examples of important legislation that relates to American consumers. 16. Define social marketing and give an example of this technique. 17. Define consumer addiction and give two examples. 18. What is an example of a consumed consumer? 19. What is shrinkage, and why is it a problem? 20. Define anticonsumption, and provide...
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