Common Buying Factors
Some industrial rrarketers segment markets by identi-
fying groups of customers who consider the same buy;ng factors impOltant. Five buying
factors are important in most industrial buying situations: (1) product performance, (2) prod-
uct quality, (3) service, (4) delivery, and (5) price. 2 Identifying a group of customers who
value the same buying factors as important is difficult, as industrial organizations' and
resellers' priorities often change.
Buyer Size and Geography
If organizations' markets cannot be easily segmented
by one of the previou s approaches, market advantages may still be realized by segmenting
based on account size or geographic boundaries Sales managers have done this for years,
but only recently have organizations learned to develop several pricing strategies for cus-
tomers that are both close and far away geographically. Similarly, different strategies can
be developed for large, medium, and small customers .
Single-Base and Multi-Base Segmentation
So far, we have talked about the use of individual bases for market segmentation. The use
of a single-base segmentation strategy is a simple way to segment markets, and is often very effective. Clearly, the use of bases such as sex (cosmetics), or age (health care products, music), or income (automobiles), provides valuable insights into who uses what prod-
ucts. But the use of a single base may not be precise enough in identifying a segment for
which a marketing program can be designed. Therefore, many organizations employ multi-
base segmentation strategies, using several bases to segment a total market. For example, the housi ng market might be segmented by family size . income, and age.
American Log Home, for example, offers a wide variety of packages and options to
its customers based on their needs, incomes, skills, family size, and usage. Packages range
from one-room shelters designed primarily for hunters to a 4,000 square-foot unit complete
with hot tub, chandeliers, and three decks. Customers can select to finish part of the inte-
rior, part of the exterior, or to have the entire structure finished by American Log Home.
The resulting huge array of products is a di sadvantage of multi-base s e g m e n t a t i o n as a strategy. Using several bases that vary in importance, considering all to be equal, could
produce misdirected efforts.
Qualifying Customers in Market Segments
Clearly, it is impo rtant to employ appropriate factors to identify market segments. Equally
important is qualifying the customers who make up those segments. Qualifications involves
judgment. Marketers must be able to differentiate between real prospects and individuals
or firms who have some similar characteristics but cannot be converted to purchasers.
It should be clear that not all market segments present desirable marketing opportu-
ni ties. Traditionally, five criteria have been employed to gauge the relative worth of a mar-
ket segment: 16
1. Clarity o/ identification: The degree to which we can identify who is in and who
is outside the segment. Part of this process also involves the delineation of demo-
graphic and social characteristics that make it easier to measure and track the iden-
tified segment. Unfortunately, obtaining segment data is not always easy, especially
when the segment is defined in terms of behavioral or benefit characteristics. Sex
is a clear basis for segmenting a product s u c h as brassieres.
Actual or potential need: Needs that reflect overt demands for existing goods and
services, or needs that can be transformed into perceived wants through educa-
APPROACHING THE MARKET
45
tion or persuasion, constitute a segment. It is further assumed that this need exists
in a large enough quantity to justify a separate segmentation strategy. This crite-
rion requires the ability to measure both the intensity of the need and the strength
of the purchasing power supporting it. A 40-story building has a clear need for
elevators .
3. Effective demand: It is not enough for an actual or potential need to exist; purchasing power must also exist. Needs plus purchasing power create effective
demand. The ability to buy stems from income, savings, and credit. Purchasing
power derived from one or more of these three sources must belong to the mem-
bers of a market segment in order for it to represent a meaningful marketing oppor-
tunity. The possession of a valid Visa or other credit card meets this criteria for
most products.
4. Economic accessibility: The individuals in a market segment must be reachable and profitable. For example, segments could be concentrated geographically, shop
at the same stores, or read the same magazines. Regrettably, many important
segments-those based on motivational characteristics, for instance- cannot be
reached economically. The elderly rich represent such a segment.
5. Positive response: A segment must react uniquely to marketing efforts. There must be a reason for using different marketing approaches in the various segments. Different segments, unless they respond in unique ways to particular marketing inputs,
hardly justify the use of separate marketing programs.
The Strategy of Market Segmentation
During the last two decades, a more complete and concise understanding of market seg-
mentation has emerged. This is not to say that there are not still unsettled issues, meas-
urement problems, and other issues to consider. The most severe problem remains the
difficulty of defining precisely the basis for segmentation. A great deal of knowledge about
the market and considerable experience with it are highly desirable. Research into consumer
motivation is essential. This does not mean that historical , descriptive data about consumers
are no longer important. Nevertheless, the ultimate purpose of going through the process
of delineating market segments is to select a target market or markets: otherwise, the seg-
mentation process is worthless.
The segmental approach will be descri bed throughout the text in greater detail. At
this point, it is sufficient to know that the segmentation strategy is the primary marketing
approach used by a majority of producers. Combined with product differentiation, it is the
essence of a contemporary marketing strategy. The activity of selecting a target market
involves five steps:
1. Identify relevant person/organization and purchase situation variables beyond the
core product variable. (For Minolta's Maxxum SLR Camera, the core product vari-
able would be fool-proof photographs, and other relevant variables might be age,
income, family composition, occasion for use, and photographic experience.)
2. Collect and analyze other related data about potential segments (e.g., character-
istics of neophyte camera users, price perceptions of these potential users, size of
group, trends, minimum product features).
3 . Apply criteria of a good segment.
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