Explain the basis for segmenting organizational markets.
Organisational products are the products which are used for further production and are not meant for final consumption. Organisational market is very large and can be segmented on the similar bases as consumer market.
However, there are some more bases on which organisational markets may be segmented.
- Type of Customer:
A common way to segment organisational market is by end user. Different end user seeks different benefits and therefore can be approached with different marketing mix.
On this basis organisational market is classified into nine segments termed as Standard Industrial Classification (SIC) Code, which are as follows:
(a) Agriculture, forestry and fisheries.
(b) Mining.
(c) Manufacturing.
(d) Construction.
(e) Transportation.
(f) Communication.
(g) Public utilities.
(h) Banking, finance and insurance.
(i) Services.
- Kind of Business:
When an enterprise produces or provides a number of products or services, the market can be segmented on the basis of kind of business. For example, the business of an insurance company can be divided as fire insurance and general insurance.
- Size of Buyer:
Organisational market can also be segmented on the basis of size of the buyer as large buyers and small buyers. The needs and attitude of these buyers are different. Big business houses categories their buyers as Major accounts and Dealer accounts. Accounts of large and reputed companies come under major accounts. Such account is handled by national accounts manager. Small accounts are categorised as dealers’ accounts which are handled by field personal working with the dealer to sell the product.
- Buying Situations:
Buyers respond differently in different buying situations. Separate strategies should be adopted to deal with buyers in different buying situations.
These buying situations may be:
(a) New buy/first time purchase.
(b) Modified buy.
(c) Repeat buy.
The first time purchase or new buy is very important as it helps in winning the customers confidence and loyalty for long term relationship. Modified buy signifies a repeat purchase but with modification in purchase requirements. Under repeat buy the purchase requirement is same but another order is placed.
Once the market has been segmented the firm is required to select its target market. A firm selects its target market in light of various factors such as its objectives, resources, size of the segment, degree of risk, profitability of that segment, etc. Here it may go for a single segment, few selected segments or full market coverage. Thereafter, it has to position its product in required market segment through suitable marketing mix.
