Marketing help- B2B

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Unit II: Segmentation

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and Marketing Strategy

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Table of Contents

Unit Lesson

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Glossary

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Unit II: Segmentation and Marketing Strategy

Marketing strategies can either be created by highly paid marketing managers who sit in the top offices of impressive buildings or at the other end of the spectrum. They might be created and implemented by those who have never read a marketing textbook but instinctively use basic marketing strategies to attract customers. These basic strategies can be defined as the

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marketing mix. The mix covers four areas of marketing: product, price, placement, and promotion. The principles can be applied to any business, big or small. The marketing strategy planning process involves narrowing down a broad set of possible marketing opportunities to a specific strategy the firm will pursue. Next, the target market will be followed by the supporting marketing mix. The marketing mix is directly associated with its corresponding target market. This will serve as a crucial element of the marketing plan. A marketing plan includes the time-related details, including expected costs and revenues for that strategy. In most firms, the marketing manager must ultimately combine the different marketing plans into an overall marketing program.

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Unit II: Segmentation and Marketing Strategy

Ways to forecast target market potential and sales, which is important not only in evaluating opportunities but also in developing the time-related details for a plan, are also reviewed. Of course, plans must ultimately be blended into an overall program, and suggestions will be provided to approach that task. Planning strategies for international markets present some

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special challenges, so the unit will be concluded by describing the different ways a marketer can address these challenges. Marketing managers fill the primary role of turning a good marketing strategy into an effective marketing plan. This narrowing down process (i.e., from marketing mixes and marketing strategies to the marketing plan and the marketing program) requires that the marketing manager have a full understanding of the market.

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Unit II: Segmentation and Marketing Strategy

A part of this plan is accomplished by conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The SWOT analysis is a careful examination of both the controllable internal and uncontrollable external forces that affect the firm. The company can control the internal strengths and weaknesses. Where there are identified weaknesses, the company can create strategies to improve those weaknesses with the idea of turning them into strengths. Where there are strengths, the company may want to determine which of those strengths are competitive advantages that can be used to exploit external opportunities.

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Conversely, opportunities and threats are external to the company. As it has limited resources, the company must be selective about which opportunities it should exploit. It also must be mindful of the threats that exist in its industry environment. Again, a threat is something the company cannot control, such as increased regulation, tax plan changes affecting the firm, or a catastrophic weather event. The effects of threats, even though they are not controllable, must be planned for prudently. Out of the SWOT planning process will emerge a marketing plan, which will be utilized to compete for a selected target market.

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Unit II: Segmentation and Marketing Strategy

Segmentation:

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Sellers can choose to pursue consumer markets, business-to- business (B2B) markets, or both. Consequently, one obvious way to begin the segmentation process is to segment markets into these two types of groups. Different factors influence consumers to buy certain things. Many of the same factors can also be used to segment customers. Sometimes, marketing managers will use more than one segmentation basis to better understand their target market customers. Each variable adds a layer of information. Think of it as being similar to the way an instructor presents their information on a PowerPoint slide to where students are able to understand the material being presented.

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Unit II: Segmentation and Marketing Strategy

Since marketers’ resources are not limitless, they need to carefully consider or classify to whom they should promote their offering or offerings. This classification process is called marketing segmentation, which is the criteria used to classify buyers. There are four major buyer characteristics used to segment consumer markets. They are behavioral, demographic, geographic, and psychographic.

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Unit II: Segmentation and Marketing Strategy

B2B Market Segmentation: The ways in which business-to-consumer (B2C) markets are segmented are in some ways similar to B2B market segmentation strategies. Segmentation by geographic location and how they use their products is common in B2B markets. Volume discounts are a common sales strategy. Large customers may warrant a dedicated account sales manager. Smaller customers may perform most of their sales communication by telephone or internet portal.

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Roman and Rodriguez (2015) have theorized that there are fewer behavioral and needs-based segments in B2B markets than in B2C markets for two reasons: (1) business markets are made up of a few hundred customers whereas consumer markets can be made up of hundreds of thousands of customers, and (2) businesses are not as fickle as consumers. The graphic on the next slide explains the differences between B2B and B2C. By observing these differences, you could also formulate some similarities as well.

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Unit II: Segmentation and Marketing Strategy

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LET’S PLAY A GAME TO TEST YOUR MEMORY

This activity will help you to identify the four major buyer characteristics used to segment consumer markets.

Click the START button below to begin the activity.

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START

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PLAY THE MEMORY GAME TO LEARN MORE ABOUT BUYER CHARACTERISTICS. CLICK THE MONEY SYMBOLS TO REVEAL

THE CHARACTERISTICS. FIND THE CORRECT WORD THAT MATCHES THE DESCRIPTION.

Correct! Consumers seek benefits rather than features. In what manner are they using the company’s product?

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Great Job! Race, age, and culture determine who customers are. In what manner does it affect the way they purchase the company’s product?

Excellent! Because customers do not all live in one place, what are the best methods in which to reach them? Does where they live impact what they purchase?

Way to go! Consumers are very mindful of value. How does value impact how they live?

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Unit II: Segmentation and Marketing Strategy

Unlike consumers, businesses are not concerned about their social standing or influenced by their families and peers. Instead, businesses are concerned solely with buying products that will ultimately increase their profits. The behavioral or needs-based segments in B2B markets are listed below.

● A price-focused segment is composed of small companies that have low profit margins and regard the good or service being sold as not being strategically important to their operations.

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Unit II: Segmentation and Marketing Strategy

B2B sellers, like B2C sellers, are exploring new ways to reach their target markets. Trade shows and direct mail campaigns are two traditional ways of reaching B2B markets. Now, however, firms are finding they can target their B2B customers more cost-effectively via email campaigns, search-engine marketing, and fan pages on social networking sites (e.g., Facebook). Companies are also creating blogs with cutting-edge content about new products and business trends of interest to their customers. For a fraction of the cost of attending a trade show to exhibit their products, B2B sellers are holding webcasts and conducting online product demonstrations for potential customers.

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The business-to-business (B2B) markets are segmented slightly differently. They are segmented along the lines of; being price-focused, quality- and brand- focused, service-focused, and partnership-focused. Firms that manufacture products such as cereals, snacks, toothpastes, soap, and shampoos often use mass marketing techniques (one-to-many). These techniques include television commercials, internet campaigns, and promotional programs, such as coupons and sampling, to reach consumers. At first, when companies sold high-quality but cheap products to large market segments, they tended to offer little variety and usually sold almost all of the products they made. Little product differentiation was available. Later, when markets became saturated, product differentiation became a key competitive advantage for mass marketers.

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Unit II: Segmentation and Marketing Strategy

Today, current marketing trends are moving away from mass marketing to targeted marketing. Improvements in technology and advances in internet use and social media have enabled marketing managers to specifically target market customers with their product messages. This way, maximum effort can be focused on the firm’s best customers. Segmenting and targeting markets do not necessarily mean shrinking the number of customers reached. In fact, it can help companies enlarge their customer base by providing

information with which to successfully adjust some component of the marketer’s offering–the offering itself, its price, and the way it is serviced and marketed.

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The trend today is toward more precise, targeted marketing. Figuring out “who is who” in terms of a company’s customers involves some detective work, otherwise known as market research.

A variety of tools and research techniques can be used to segment markets. Government agencies, such as the U.S. Census Bureau, collect and report vast amounts of information and economic data on the population that can reveal changing consumption trends. Technology is also making it easier for even small companies and entrepreneurs to gather information about potential customers. For example, many online game companies originally believed that their target markets consisted of U.S. customers, but when these firms looked more closely at who was downloading games from their websites, they realized they were people from all over the globe. With the increased use of social media, companies are able to get information on consumers’ search behavior. Loyalty cards that consumers scan at many grocery and drug stores provide an incredible amount of information on consumers’ buying behavior (Hill & Johnson, 2014).

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Unit II: Segmentation and Marketing Strategy

Segmenting and Targeting a Firm’s Current Customers:

Finding and attracting new customers is generally far more difficult than retaining current customers. Finding new customers, getting to know them, and figuring out what they really want is also a difficult process, one that is fraught with trial and error. That is why it is so

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important to get to know, form close relationships, and focus selling efforts on current customers (Shannahan et al., 2016). In addition to studying their buying patterns, firms also try to get a better understanding of their customers by surveying them or hiring marketing research firms to do so or by utilizing loyalty programs.

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Unit II: Segmentation and Marketing Strategy

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For example, when signing up to become a frequent flier with a certain airline, the airline will likely ask potential frequent flier awards applicants a number of questions about their likes and dislikes. This information will then be entered into a Customer Relationship Management (CRM) system, and these applicants might be emailed special deals based on the routes they tend to fly. British Airways go so far as to track the magazines its most elite fliers like to read so the publications are available to them on their flights.

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Unit II: Segmentation and Marketing Strategyt

Regardless of how well companies know their customers, it is important to remember that some customers are highly profitable, others are not, and others actually end up costing the firm money to serve them. Consequently, the firm will want to interact with some customers more than others. Believe it or not, some firms deliberately “untarget” unprofitable customers.

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The knife cuts both ways, though. Not all firms are equal in the minds of consumers who will choose to do business with some companies rather than others. To consumers, market segmentation means the following: Meet my needs, and give me what I want when I want it (Shannahan et al., 2016).

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Unit II: Segmentation and Marketing Strategyt

Summary

Segmentation bases are criteria used to classify buyers. The main types of buyer characteristics used to segment consumer markets are behavioral, demographic, geographic, and psychographic.

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How people and organizations behave toward products can enable marketing managers to behaviorally segment them into their own separate group. Marketers may see other consistent target market customer characteristics, such as age, income, ethnicity, family size, and so forth, and create segments based on these demographics. Where customers live may also have an impact on how customers purchase a company’s products. They would then be grouped geographically. Finally, how customers live their lives; their lifestyle behavior; and their opinions, attitudes, and values may yield valuable psychographic grouping information. Marketing managers understand that sometimes marketing strategies can be more effective if more than one of these target market grouping methods is used. B2B marketing managers use similar approaches, only less so.

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References

Hill, D. J., & Johnson, S. (2014). Teaching graduate accounting students what they need to know about marketing their

profession. American Journal of Business Education, 7(1), 59. Roman, S., & Rodriguez, R. (2015). The influence of sales force technology use on outcome performance. The Journal of

Business & Industrial Marketing, 30(6), 771783. Shannahan, R. J., Shannahan, K. L. J., Bush, A. J., & Moncrief, W. C. (2016). Taking the good with the bad-customer type as

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a segmentation criterion and differential influencer of sales performance. Journal of Marketing Theory and Practice, 24(3), 283305.

Tuten, T. L. (2020). Principles of marketing for a digital age. SAGE.

https://bookshelf.vitalsource.com/#/books/9781526485359

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Unit Glossary

Marketing Mix The mix covers four areas of marketing: product, price, placement, and promotion. The principles can be applied to any business, big or small.

Marketing Segmentation Criteria used to classify buyers.

SWOT analysis A careful examination of both the controllable internal and uncontrollable external forces that affect the firm.

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(Tuten, 2020)

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