SEGMENTATION

VARIABLES

FOR

INDUSTRIAL/ BUSINESS MARKETS:

Segmentation strategy was used mainly for marketing consumer goods. At present, segmentation strategy is used for marketing industrial goods/ markets. Important segmentation variables for industrial markets are: Customer location, types of industry, size of the firm, purchase criteria, etc. the details of segmentation of industrial markets are as given below: 1) Customer location: The geographical location of a

customer is used as one basis for segmenting industrial product markets. For example, firms located in the ThaneNew Mumbai belt constitutes one segment for a telecom firm, while firms located at Nariman Point area of Mumbai city constitutes another market segment for the firm. Similar segments can be decided by firms selling machinery, spare parts etc. Here, the marketing firm will study the needs and expectations of companies of the area and adjust marketing mix accordingly.

2) Types of Industry: Here, segmentation of industrial market will be on the basis of features of buyers i.e. industrial user. Some buyers may purchase regularly while some other may purchase occasionally. Some industrial units may purchase product like spare parts on a small scale. Such segmentation enable the marketing firm to meet the needs of different industrial units in an orderly manner. 3) Size of the Firm / customer: In this segmentation, the

customer firms are classified on the basis of size and purchases. As a result, firm will be classified as per their operational size and the quantity which they purchase. for example, an industrial seller may put his customers under the following segments: a) Segment A Large buyers. b) Segment B Medium size buyers. c) Segment C Small buyer

4) Purchase Criteria:

under this type of segmentation, the

selling firm may segment the market on the basis of purchase criteria. For example, using prices as a base, the selling firm

can segment his buyers into sensitive, highly sensitive and insensitive buyer to price variations. It is also possible to put customer into different segments as per their needs or frequency of purchases. Purchase criteria segmentation base is also call buyer behavior or motivation base.

ADVANTAGES SEGMENTATION:

OF

MARKET

1) Facilitates consumer-oriented marketing:

Market

segmentation facilitates formation of marketing-mix which is more specific and useful for achieving marketing objectives. Segment wise approach is better and effective as compared to integrated approach for the whole market. 2) Facilitates suitable marketing mix: Market

segmentation enables a producer to understand the needs of consumers, their behavior and expectation as information is collected segment wise in an accurate manner. Such information is purposefully usable. Decisions regarding

Four Ps based on such information are always effective beneficial to consumer and the producers. 3) Facilitates effective product strategy: Due to market

segmentation, product development is compatible with consumer needs as there is effective crystallization of the specific needs of buyer in the target market. Market segmentation facilitates the matching of products with consumer needs. This gives satisfaction to consumers and higher sales and profit to the marketing firm. 4) Facilitates the selection of promising markets: Market

segmentation facilitates the identification of those submarkets which can be served best with limited resources by the firm. A firm can concentrate efforts on most productive/profitable segments of the total market due to segmentation technique. Thus market segmentation

facilitates the selection of the most suitable market. 5) Facilitates opportunities: exploitation of better marketing

Market segmentation helps to identify

promising market opportunities. It helps the marketing man to distinguish one customer group from another with in a given market. This enables him to decide his target market.

It also enables the marketer to utilize the available marketing resources effectively as the exact target group is clearly identified. 6) Provides proper direction to marketing efforts:

marketing segmentation is rightly described as the strategy of dividing the markets in order to conquer them .Due to segmentation, a firm can avoid the market which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives. 7) Facilitates optimum use of resources: marketing

segmentation facilitates efficient use of available resources. It enables a marketing firm to use its marketing resources in the most efficient manner in the selected target market. The marketing firm selected the most promising market segment and concentrates all attention on that segment only. This offers best result to the firm in terms of sale, profit and consumer support as compared to the results available from spending such resources on the total market.

What is Market Segmentation Analysis?

Market segmentation analysis provides a comprehensive examination of the contraceptive market, identifies current roles of various sectors with respect to consumer groups, and helps determine how roles need to change to achieve contraceptive security. Specifically, market segmentation analysis helps to do the following:

Identify consumer groups and the characteristics that define them, such as age, education, residence, socioeconomic status, parity, work status, and health insurance coverage; Define provider groups (e.g., the public sector, the commercial sector, nongovernmental organizations (NGOs), and social marketing programs); and Understand consumer-provider interaction by addressing the following questions: - What is the socioeconomic and demographic profile of those who depend on the public versus the private sector

for their family planning (FP) needs? Who supplies contraceptives to whom? Do the nonpoor benefit from free public sector services? Does use of the two sectors vary by age (i.e., are youth more likely to use private sector services)? - What are the methods used by those who obtain contraceptives from the private versus public sector? For example, is the public sector the primary provider of resupply methods?

Why Is Contraceptive Market Segmentation Analysis Important?

In many countries, contraceptive

Figure 1: Socioeconomic Profile of MOH Family Planning Clients in Nicaragua

usersregardless of their ability to payrely heavily on free or subsidized products made available by the public sector. In particular,
Q4 24% Q3 22% Q2 19% Q5(Highest) 21% Q1(lowest) 14%

significant proportions of better-off clients obtain subsidized contraceptives from Ministry of Health (MOH) facilities rather than pay out of pocket in the commercial or NGO sector. The reliance of able-to-pay consumers on subsidized products poses a severe challenge to achieving contraceptive security, especially in the face of declining contraceptive donations and scarce public sector resources. Reducing better-off consumers dependence on the public sector and ensuring that the needs of vulnerable and priority populations are met in the absence of donor assistance requires targeted public sector services and greater involvement of the commercial sector in the

contraceptive market. A market segmentation analysis is a necessary first step toward this endit provides a complete analysis of the contraceptive market, identifies current roles of different sectors, and helps determine how those roles need to change to achieve contraceptive security.

Why Is Contraceptive Market Segmentation Important in Advocating for Contraceptive Security?

A market segmentation analysis yields clear and concrete information and data about problems and deficiencies in the contraceptive market. It highlights, with user-friendly graphs and tables, key issues that a country needs to address to move toward contraceptive security. Such issues and supporting data may include the following: Public sector resources benefit those who can afford to pay. Able-to-pay clients should be redirected to the private sector. For example, as Figure 1 from a recent market segmentation analysis shows, 45 percent of those who receive

contraceptives from the MOH in Nicaragua belong to the fourth and fifth socioeconomic quintiles; by contrast, only 30 percent of MOH clients belong to the two lowest quintiles.

 The public sector needs to target its scarce resources to the most vulnerable groups, such as populations in remote rural areas and the indigent and poor. In Nicaragua, for example, only 30 percent of its clients are poor. The MOH should focus its efforts on increasing the proportion of poor clients that it serves. It is essential to mobilize the private sector to serve current and potential users. In Nicaragua, at least 45 percent of MOH clients are in the top two income quintiles and should therefore be redirected to the NGO and commercial sectors to free up MOH resources to serve the poor and needy.
Social security institutes need to
Figure 2: Sources of Contraceptives for Social Security Beneficiaries: Peru
NGO 4%

play a more significant role in the provision of contraceptives; family planning users with social security coverage currently rely

Pharmacy

12%
Private/ Commercial Public/MOH 45%

disproportionately on the MOH. As Figure 2 from the Peru market

12%
Social Security 27%

segmentation analysis shows, 45 percent of social security beneficiaries receive their contraceptives from the MOH. However, as contraceptive donations decline, the MOH needs to consider ways to shift the responsibility for serving eligible clients back to social security health providers. Using market segmentation data to make the case to both the MOH and social security institutes can be effective for advocacy purposes.

How

is

Contraceptive

Market

Segmentation Analysis Conducted?

The market for FP services includes contraceptive methods, consumers, and providers. Contraceptive methods include both modern and traditional methods. Consumers are defined as women of reproductive age (15 to 44 years), including those using a modern contraceptive method and those with an unmet need for family planning. Providers are defined as government and private for-profit (commercial sector) and not-for-profit

(NGO) entities. The way in which the various components of the FP market fit together is referred to as the FP market structure.

An important element of the analysis calls for establishing households ability to pay for family planning services, which requires creation of a standard of living index (SLI) that allows households to be ranked from poorest to richest. The SLI is defined in terms of whether or not a household possesses certain assets and household amenities, such as electricity, roof material, wall material, refrigerator, television, automobile, radio, and other amenities. Factor analysis is the quantitative method used to create the SLI.

Household data are then used to divide the population into five SLI quintiles, with the poorest group consisting of women from households with the fewest assets and the richest group comprising women from households with the most assets. These groups provide the basis for (1) tabulating socioeconomic and demographic characteristics such as age, education, parity, and place of residence across the five SLI quintiles; (2) comparing

method use and provider sources across the SLI quintiles to determine the extent of differences across groups; and (3) creating market segments based on socioeconomic

characteristics, method use, and provider sources across quintiles by urban and rural areas.

What Countries Have Conducted Market Segmentation Analyses?

Many countries, including Bangladesh, Bolivia, Egypt, Ethiopia, Honduras, Jordan, Kenya, Madagascar, Morocco, Nicaragua, Paraguay, Peru, Philippines, Romania, Turkey, and Ukraine, have conducted market segmentation analyses.

For example, Turkey conducted a market segmentation analysis with support from the MOH, the U.S. Agency for International Development (USAID), and partners. The analysis identified current and potential market niches for the private sector. A workshop on public-private partnerships helped integrate the

private sector into a policy dialogue about the contraceptive financing challenge and encouraged pharmaceutical companies to view the public sectors supply needs as a new market. The information from the market segmentation analysis also helped the MOH advocate successfully with the Ministry of Finance to increase contraceptive financing such that the MOH budget for contraceptives saw a substantial increase in 2002. Kenya recently completed a contraceptive market segmentation analysis (POLICY/Kenya presentation, 2005). Findings showed that only about 12 percent of urban and rural clients from the lowest income group use modern contraceptives as compared with over 40 percent among the wealthiest clients. The majority of the poorest relied on the public sector for contraceptive services and supplies. The analysis also identified significant leakage of benefits, with two out of every five among the wealthiest obtaining their contraceptives from the public sector. The Kenya analysis will be used in policy dialogue among key partners and stakeholders, including members of the new government, to build commitment to reform and to implement the countrys existing waiver and exemption policies for more effective targeting to the neediest sectors of the population.