Customer Segmentation in Business-to-Business Markets

Abstract

The purpose of this note is to help students better understand the concept of customer segmentation in a business-to-business (B2B) context, focused on such topics as the role segmentation plays in the larger marketing strategy of which it is a part, the process, primary approaches, and variables.

Excerpt

UVA-M-0792

Mar. 18, 2011

CUSTOMER SEGMENTATION IN BUSINESS-TO-BUSINESS MARKETS

Introduction

The purpose of this note is to help students better understand the concept of customer segmentation in a business-to-business (B2B) context. Although a number of the issues in business-to-consumer (B2C) segmentation are similar, there are some distinct differences in approaches. Our attention will be focused on such topics as the role segmentation plays in the larger marketing strategy of which it is a part, the process, primary approaches, and variables.

Here are two definitions of segmentation:

Segmentation is the process of partitioning markets into [groups] of potential customers with similar characteristics who are likely to exhibit similar purchase behavior…The [process] of segmentation is to analyze markets, find a [defensible] niche, and develop and capitalize on this superior competitive position. This can be accomplished by selecting one or more groups of consumers/users as targets for marketing activity and developing a unique marketing program to reach these prime prospects [market segments].

Segmentation means the splitting of a market into groups of end-users who are (1) maximally similar within each group and (2) maximally different between groups.

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Keywords: purchase decisions, situational analysis, strategic objectives, targeting, positioning