0504

Problem

Sara Lee Corporation derives more than $1.5 billion of sales each year from the institutional market (for example, hospitals, schools, restaurants). Explain how a firm such as Sara Lee or General Mills might apply the concept of market segmentation to the institutional market.

Step-by-step solution

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Step 1/2

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

Even though companies like SL and GM make better profits in institutional markets like hospitals, schools, restaurants, there is a need and purpose to divide these markets into specific categories. This categorizing of profit providers helps in analyzing the future profits and required modifications if required.

The application of market segmentation concept by these organizations to the institutional markets varies in some aspects. These aspects are explained below in detail.

Step 2/2

Application of market segmentation concept to institutional markets:

• Firstly, companies select their marketing endeavors to segments which include profitable customers.

• Secondly, Company’s ability and resource commitments are evaluated and measured which are essential to serve customers.

• Thirdly, profitable elements are analyzed and scrutinized in a proper way to reap maximum possible benefits.

• Lastly, companies implement business strategies to widen the relationship with profit providing customers and endeavors to convert bad customers to better ones. The bottom level customers are either discouraged or weeded out.