Sequential segmentation

Business marketers generally identify segments through a sequential process. Consider an aluminum company: The Company first undertook macro segmentation. It looked at which end use market to serve: automobile, residential, or beverage containers. It chose the residential market, and needed to determine the most attractive product application: semi-finished material, building components, or Aluminium mobile homes.

Deciding to focus on building components, it considered the best customer size and chose large customers. The second stage consisted of micro-segmentation. The company distinguished among customers buying on price, service, or quality. Because the Aluminium Company had a high service profile, it decided to concentrate on the service motivated segment of the market.

Business buyers seek different bundles based on their stage in the purchase decision process:

* First-time prospects — Customers who have not yet purchased but want to buy from a vendor who understands their business, who explains things, well, and whom they can trust.

* Novices — Customers who are starting their purchasing relationship want easy-to-read manuals, hot lines, a high level of training, and knowledge sales reps.

* Sophisticates – Established customers want speed in maintenance and repair, product customization, and high technical support. These segments may also have different channel preferences. First-time prospects would prefer to deal with a company salesperson instead of a catalog or direct-mail channel, because the latter provides too little information. Sophisticates, on the other hand, may want to conduct more of their buying over electronic channels.

One proposed segmentation scheme classified business buyers in three groups, each warranting a different of selling:

* Price-oriented customers (transactional selling). They want value through lowest price.

* Solution oriented customers (consultative selling). They want value through more benefits and advice.

* Strategic-value customers (enterprise selling). They want value through the supplier co-investing and participating in the customer’s business.

A packaging manufacturer decided to upgrade and rename sales reps as packaging consultants at a cost of $10 million, but 90% of its customers bought based on transaction. The company failed and was acquired by a major competitor who reintroduced a transactional selling effort.

A consulting firm replaced its long term consultants with salespeople to sell quick consulting projects. They acquired many new clients but most of their old clients, who wanted consultative selling.

A container manufacturer selling consultatively to a major food company was asked to join in some risk and gain sharing involving co-development of radically new packaging approaches. It refused and lost the account.