Macro and micro segmentation: Variables to segment organization markets!
Organizational markets can be segmented based on various factors, which can be broadly classified into macro-segmentation and micro-segmentation.
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First, macro-segmentation and then micro-segmentation bases are used when segmenting organizational markets.
To segment the market for organizations, a company can use macro-segmentation variables such as the size of the organization, its location, and the industry to which it belongs.
A large organization may buy the same product as a smaller one, but buy in a different way. A large organization buys larger lots and has a formal buying process. It will have specialized departments such as purchasing and quality control, each with an individual mandate. You are also likely to demand more services and discounts.
The company's list price must take into account the volume discounts that large customers will inevitably demand, and its salespeople must be good negotiators. A company may need to design a unique marketing mix to serve each of its major customers, and may need dedicated salespeople to serve each of them.
It can happen that the profitability of a company to serve large clients is low and, therefore, it is not prudent to ignore smaller clients who do not want comprehensive services and deep discounts. A company may develop a business model to serve a large number of small customers, which is not necessarily less profitable than the business model of another company that serves a few large customers.
The industry a company belongs to largely determines what it would buy. An industry has a unique need for products, purchases in a specific way, and requires a specific level of quality in the product it purchases.
Thus, a company can sell a product such as computers to customers in different industries, but cannot similarly sell and sell the same computer to customers in different industries. Although companies in an industry buy somewhat differently, it is possible to design an industry marketing mix that a company can tailor to different industry buyers.
Because of this, it is important for a company to thoroughly research the needs of an industry before beginning to court companies in that industry.
There are regional differences in purchasing practices and needs. Companies operate within the limits of their national culture.
In an American company, a purchasing manager may have full authority to make a purchasing decision, while in a Japanese company, a purchasing manager may need to build consensus among multiple stakeholders before making a purchasing decision.
Each company buys differently from other companies in its industry, and a salesperson must develop a detailed understanding of how each company buys.
It is important that sellers spend a lot of time understanding the roles that different roles play in the buying process and their individual mandate. It is also important to understand the buyer's philosophy of emphasizing quality, price, and the intent to build long-term relationships with sellers.
A company's selection criteria depend on how it has chosen to compete in its own market. So one buyer doesn't change quality because they make a premium product, and another doesn't change price because they make a good value product.
A seller needs to understand what each of their buyers is trying to achieve for their target market in order to know how they would buy: the buyer who buys premium products will be willing to pay a higher price if the seller offers those that improve the quality of their products. products, and the buyer who buys low-cost products will be willing to buy inferior products if the seller offers to lower his price.
Therefore, a seller must have a different marketing mix when their buyers have different selection criteria, and sellers must emphasize different benefits to different customers.
Structure of the decision-making unit:
In an organization, a large number of people influence the purchase decision. Although there is no decision-making unit or DMU in a formal organizational chart, its members wield enormous influence over how a purchasing process works and who is ultimately selected as a supplier.
Who is a member of the DMU depends on the product being purchased and whether the product has been previously purchased. For example, if a buyer is considering outsourcing the manufacturing of a component of a new product, the DMU might consist of product developers, process engineers, quality engineers, manufacturing engineers, assembly engineers, and buyers.
But if a buyer is thinking of purchasing grease for their machines, the DMU may only consist of production engineers and buyers. If the product was previously purchased, the DMU should consist of only quality engineers and buyers, since the supplier has already been evaluated on parameters important to the buyer.
The task now is to ensure that products of consistent quality are delivered on time. It also depends on the industry the buyer is in. In one industry, top management may make the decision, in another industry, engineers may play a role, and in another, buyers may play a role. A company's sales approach depends largely on the priorities of the DMU members.
The size of the DMU depends on the type of product purchased and whether the product was previously purchased. The purchasing process will take longer when the size of the DMU is large because suppliers are evaluated on all parameters that are important to all DMU members.
For example, quality engineers make sure that the supplier can meet quality standards, and product developers make sure that the component performs the function for which it was designed. Therefore, a vendor must be willing to dedicate resources and time to deal with a large DMU. The purchase process is short when the size of the DMU is small and also when the product is previously purchased.
It is useful to categorize organizational purchases into straight rebuy, modified rebuy, and new allocation. Whether a particular purchase is a straight repurchase, modified repurchase, or reassignment will affect the duration of the purchase process, who the members of the DMU will be, and what their selection criteria would be. Once a salesperson categorizes a purchase into one of the purchase classes, he can estimate the time and resources required to close the deal.
When a company purchases an item for the first time, it will favor suppliers who have the patience to train the buying company. You will also be suspicious of the sellers as you don't really know the credibility of the sellers.
Sellers need to be patient as the buyer will review many options and make many inquiries before choosing a supplier (new task). If the company already purchased the item but only wants to change the product specifications or terms of purchase, wait for the current supplier to make the necessary changes and reverse the order.
New providers can launch, but due to their proximity to the buyer (modified buyback), they have to prevail against the established provider. The incumbent supplier must receive the order if the buyer continues to purchase the same item in the same manner. New entrants can apply, but they must prove that they are decidedly better than the incumbent (straight rebuy).
Decentralized versus centralized purchasing is an important variable due to its influence on purchasing decisions. Purchasing centers are linked to purchasing specialists who become experts in buying a product or range of products. They are more familiar with cost drivers and provider strengths and weaknesses than decentralized generalists.
The ability to buy in volume means your power to demand price concessions from suppliers increases. In centralized purchasing systems, purchasing specialists within the DMU have more power than technical ones, such as engineers.
With decentralized purchasing, users and technicians have a lot of influence and it is important to understand their requirements. A buyer can negotiate the price and place the order, but the buyer respects the choice of the user and the technician.
The central purchasing segment can be served by a national accounts team, while the decentralized purchasing segment can be served by area representatives.
Marketers need to identify the specifics of the innovative segment, as these are companies they should target first when launching new products. Follower companies buy the product, but only after the innovators approve it.
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