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Problem

Some firms follow a single-stage segmentation approach using macrodimensions; others use both macrodimensions and microdimensions. As a business marketing manager, what factors would you consider in making a choice between the two methods?

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Step 1/3

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.

Step 2/3

Broadly, business markets can be segmented by two bases.

1. Macro segmentation

2. Micro segmentation

• Macro segmentation focuses on the elements such as size of market, its location, and structure of organization.

• Micro segmentation refers to further division of macrosegments on the basis of characteristics of consumers. These characteristics include buying behavior, decision making factors, perception towards distributers.

Pioneers in business strategy often recommend a two-stage approach to business market segmentation.

1. Identification of meaningful macro segments.

2. Classification of macro segments into micro segments.

Some firms follow a single stage segmentation approach using macro dimensions where as others use both macro and micro dimensions. Specific factors are responsible for the variance in the application of stage segmentations approach in the business activities.

Step 3/3

As a marketing manager, one would consider the following factors in making a choice between the any two given choices:

• Consumer behavior and factors influencing their buying decision: Consumer at different geographic locations have different buying behavior. They have different criterion for their choice and thus might require only single stage or more complex two stage segmentation.

• Consumer needs: The foremost basis of segmentation is to identify the customer needs. The customer might have less complex set of expectations and needs while it may also have sophisticated and hidden needs. According to this single or two stage segmentation is selected.

• Type of business: Based on the type of business the market can be profitable just on basis of location and size. If the business offers product and services which require in depth market knowledge and analysis of external environment, two stage segmentation is used. Otherwise single stage is used.

• Market dynamics: The market dynamics such as level of competitiveness, uniqueness of product, consumer awareness etc. determines the choice between single or two stage segmentation.

• Profitability of segments: It only make sense to invest in segment which is more profitable. If investing in macrosegments can provide much better profitability than microsegment, then single stage segmentation is used.

• Goals of company: If company wants to create personalized experience and value to the customers then it has to choose highly specific market segments and pursue two stage segmentation.