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STRATEGY BASED SEGMENTATION OF INDUSTRIAL MARKETS

ACKNOWLEDGEMENT

The authors wish to acknowledge the financial support of Heliview, and thank Corma Otte for research assistance.

CORRESPONDENCE

Tilburg University, Department of Business Administration, Marketing and Marketing Research, P.O. Box 90153, 5000 LE Tilburg, The Netherlands (Tel. +31 13 4663043).

Theo M.M. Verhallen is professor of Marketing and Marketing Research at Tilburg University, The Netherlands. Ruud T. Frambach is associate professor of Marketing at Tilburg University, The Netherlands and at The University of Ghent/The Vlerick School of Management, Belgium. Jaideep Prabhu is assistant professor of Marketing at Tilburg University, The Netherlands.

Teaser: Strategic Orientation Outperforms Traditional Segmentation Criteria Breakout #1. Industrial market segmentation is currently primarily based on geographics and demographics. (Introduction, page 5)

Breakout #2. The strategic orientation of firms directly influences their buying behavior.

(Industrial Market Segmentation, page 6)

Breakout #3. Firms’ strategic orientations relate to production, marketing, human resources, R&D and finance. (Strategy as a Basis for Segmentation: Strategic orientation, page 9)

Breakout #4. A Firm’s strategy is a better predictor of adoption. (Results: Strategic type and industrial buying behavior, page 12)

Breakout #5. Strategy based segmentation ensures more market oriented targeting and positioning. (Discussions and Conclusions: Managerial Issues, page 15)

Abstract

Segmentation of industrial markets is typically based on observable characteristics of firms such as their location and size. However, such variables have been found to be poor predictors of industrial buying behavior. To improve the effectiveness and power of existing approaches to industrial market segmentation, we propose using unobservable characteristics such as organizational strategy in addition to the observable characteristics currently employed. An important justification for our approach is that a firm’s strategy influences its behavior, especially its buying behavior; as a result, adding the strategic type and orientation of firms to a segmentation scheme is bound to improve the effectiveness of the scheme. To test the effectiveness of our approach we conducted an empirical study of the purchase of car phones by over 200 Dutch firms. The results support our predictions. In fact, they indicate that a firm’s strategy is an even more important determinant of industrial buying behavior than the variables currently employed. Thus, strategy based segmentation may be a more powerful and effective approach to industrial segmentation than current approaches.