What segmentation bases are used for business markets?
Business market segmentation is a crucial process that enables firms to categorize their potential customers into distinct groups based on shared characteristics. Unlike consumer segmentation, where personal preferences and behaviors are often the focus, business market segmentation delves into organizational traits and operational practices. This differentiation helps firms design targeted marketing strategies, optimize resource allocation, and build stronger relationships with their business clients.
The segmentation bases used in business markets are conceptually similar to those in consumer markets but are tailored to the unique aspects of organizational buying and behavior. For instance, while consumer segmentation might rely on variables like age or lifestyle, business segmentation focuses on factors such as geographic reach, industry type, operating practices, and organizational culture. These variables not only highlight operational differences but also provide insights into how businesses make purchasing decisions and engage with suppliers.
By employing these segmentation bases, firms can uncover diverse customer needs within their target markets, ensuring their offerings align with client expectations. For example, understanding whether a business has centralized or decentralized purchasing decisions can influence the approach to personal selling or contract negotiations. Similarly, identifying whether an organization is an early adopter or a market follower can guide the development of innovative or cost-focused solutions.
The following tables provide a detailed overview of the primary segmentation bases and variables used in business markets…
A brief description of the various main business segmentation bases is outlined in the following table:
Broad Category of Business Market Segmentation Base |
Which factors are being considered? |
| Geographic location | Where does the organization operate?(Could be multiple locations) |
| Business description | What sort of business is it, where does it fit into its industry? |
| Behavioral/operating practices | How does the organization undertake its purchasing decisions? |
| Culture/personality | What is the management style of the organization? |
Understanding business market segmentation bases/variables
The following table outlines some of the segmentation variables that can be utilized in business markets, listed by main categories:
| Main Category | Segmentation Base | Questions to help define segment groups |
| Geographic location/s | Country/continent | In which countries do they operate? |
| Region/area of the country | In which regions do they operate? | |
| Number of outlets | Does the firm have one office only, or potentially 1,000s of outlets? | |
| Geographic spread | Does the firm operate in one geographic area, or spread over a wide area? | |
| Business description | Industry | What industry do they operate in? |
| Size (by staff or outlets) | How many staff do they have, or how many outlets do they have? | |
| Size (revenues/profits) | What is their financial position? | |
| Products sold | What is their product mix? | |
| Equipment/technology | What is the main forms of manufacturing and/or IT equipment do they use? | |
| Company ownership | Are they a public or private company? Are they a subsidiary? | |
| Behavioral/operating practices | Do they have a centralized purchase decision-making process? | |
| Are they generally loyal to suppliers or do they frequently switch? | ||
| Are they fast or slow decision makers? | ||
| Do they use franchising? | ||
| Culture/personality | Are they a lead user (an early adopter) or more of a market follower? | |
| Do they make highly analytical decisions or are they more intuitive? | ||
| How socially and environmentally conscious are they? | ||
| Organizational goals | Do they have aggressive growth goals? | |
| Do they want to be seen as a market innovator? | ||
| How important is brand equity to them? | ||
You can also review examples of business segmentation on this website.
After reviewing this list, you will note that there are two similar points between the consumer and business markets in terms of segmentation bases. The first is that there are clearly many ways to segment (divide) both types of markets. And the second point is that it is necessary to have a good understanding (that is, suitable data and information) to effectively segment any market. Particularly when segmenting by behavior and culture, a deep knowledge of the firms in the marketplace is very important, otherwise the segmentation process is unlikely to be effective.
Business Segmentation Bases FAQs
What is the primary difference between business and consumer market segmentation?
Business segmentation focuses on organizational traits and operational behaviors, such as purchasing processes, company size, and industry, while consumer segmentation emphasizes personal characteristics like age, lifestyle, and buying preferences.
How does geographic location influence business market segmentation?
Geographic location determines where a business operates, which can influence logistics, local market conditions, and regional regulations. Firms may target businesses in specific regions or countries to address localized needs.
What role does a business’s industry or sector play in segmentation?
The industry or sector provides insight into the type of products or services a business needs. For example, healthcare organizations require medical supplies, while tech companies may prioritize software solutions.
How can company size, in terms of staff or revenue, be used as a segmentation base?
Company size helps marketers determine the scale of the business and tailor offerings accordingly. Small businesses may prefer cost-effective solutions, while larger corporations often require scalable, enterprise-grade products.
Why is it important to consider a company’s purchasing behavior in segmentation?
Understanding whether a company makes frequent purchases, evaluates multiple suppliers, or prefers long-term contracts allows firms to tailor sales strategies and promotional efforts to align with these patterns.
How do centralized vs. decentralized purchasing decisions affect segmentation?
Centralized decision-making means purchasing is controlled by a single location or department, while decentralized purchasing allows regional or branch offices to make independent decisions. This influences how marketing and sales efforts are structured.
What factors are included in behavioral and operating practices segmentation?
Factors include the speed of decision-making, loyalty to suppliers, use of franchising, and purchasing protocols. These behaviors shape how businesses interact with suppliers and select products or services.
How does company culture or management style contribute to market segmentation?
The culture or management style affects decision-making processes and organizational priorities. Analytical organizations may require data-driven pitches, while intuitive companies might value creative solutions.
Why is it essential to understand if a business is an early adopter or a market follower?
Early adopters seek cutting-edge solutions and are open to innovation, while market followers prefer established, proven options. This distinction guides product development and marketing strategies.
What are some examples of organizational goals that can be used as segmentation bases?
Examples include goals like aggressive growth, innovation leadership, brand equity building, or sustainability efforts. These goals influence purchasing priorities and alignments with suppliers.
How can social and environmental consciousness be factored into segmentation?
Companies that prioritize social and environmental responsibility often seek suppliers and partners who align with their values, such as sustainable products or ethical practices.
What types of products or technologies influence a business’s segmentation profile?
The equipment or technologies a company uses, such as advanced IT systems or manufacturing equipment, can define its operational needs and the types of suppliers it engages with.
Why is understanding geographic spread important for segmentation?
Firms with a wide geographic spread may need solutions that accommodate diverse locations, while single-location businesses often require localized offerings or support.
How can segmenting by company ownership (e.g., public, private, subsidiary) impact marketing strategies?
Public companies might prioritize compliance and scalability, while private firms often focus on cost efficiency. Subsidiaries may depend on decisions from parent organizations.
Why is it necessary to have deep knowledge of the firms in the marketplace for effective segmentation?
Effective segmentation relies on accurate and detailed insights into business needs, behaviors, and constraints. Without this understanding, segmentation strategies may fail to resonate with target segments or achieve desired outcomes.