0502

Problem

Automatic Data Processing, Inc. (ADP) handles payroll and tax-filing processing for more than 300,000 customers. In other words, firms outsource these functions to ADP. Suggest possible segmentation bases that ADP might employ in this service market. What criteria would be important to organizational buyers in making the decision to turn payroll processing over to an outside firm?

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Step 1/3

Market segmentation is the art of analyzing and classifying of potential customers in various groups posing some common characteristics which helps in formulating and implementing a set of business criteria by the business marketers. Broadly, business markets can be segmented by two bases.

1. Macro segmentation

2. Micro segmentation

• Macro segmentation focuses on the elements such as size, location, and organizational structure.

• Micro segmentation usually requires enormous market knowledge which includes buying decisions criteria, importance of purchase, and attitude towards vendors.

ADP incorporation which handles payrolls and tax-filing processing for its customer organizations requires some specific segmentation bases to employ in this service market.

Step 2/3

Suggested segmentation bases:

• Product/service application:

In this basis, a marketer divides the market on the basis of specific end-use applications. This segmentation requires NAICS (NORTH AMERICAN INDUSTRIAL CLASSIFICATION SYETEM).

• Value in use:

It is an economic value of a product or service to the user in an application. This economic value varies by customer application.

• Purchasing situation:

The first time or initial buyers are ignorant of any primary information. These buyers must be analyzed and provided adequate awareness about market and its products and services. These set of buyers can be segmented as a group.

Step 3/3

Criteria to outsource business process:

• Product quality:

The products quality is the primary aspects of the organization. It is the measuring scale to scale the efficiency of an organization.

• Reliable delivery:

The distribution and sale of the products alone depends upon the delivery posses. Unreliable deliveries often shatter ultimate designed products.

• Technical support:

Specific type of business organizations is unable to procure adequate technical support to their own business processes. It would be an appropriate move to outsource the process for the expert technical support.

• Price:

Sometimes, it is better to outsource apart or a whole segment of a specific business activities. It could reduce the expenditure on training the employees and maintenance cost.

• Supply continuity:

By outsourcing a part of business process, a firm could concentrate on the main activity and the processed work could be extracted without any obstacles or breakages.