Question

Some firms choose market segments using only macro bases of segmentation; others use both macro and micro bases for segmenting the market. As a business marketing manager, would you prefer to use only macro bases, or both macro and micro bases for market segmentation? Which factors would you consider in choosing a segmentation method? Provide illustrations to support your view

Answer 1

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EXPLANATION:

As a marketing manager in a business-to-business environment, I believe that utilising both macro and micro bases would be the most effective method in segmenting the business market for potential clients. However, to aid a successful segmentation process I believe it is important to identify which specific factors of these bases are most effective in identifying attractive business opportunities.

Thus, I have chosen to focus on the following factors; brand reputation and quality, business stability and growth within the business. While there are more factors that can be applicable to certain industries, for example decision style and demographics, focusing on the previously mentioned factors will provide a comprehensive outlook on the market, as well as distinguishing what value your business can provide to your customers to ultimately create a superior offering. To illustrate the importance of these factors, critical theories and the analysis of secondary sources will be applied.

As a business-marketing manager the first factor I would consider is brand reputation and quality. This is crucial for businesses to examine as it narrows down prospective clients to others that reflect the same or similar ideologies than that of the supplier. Whether it’s current trends, company culture or political, social and environmental issues. Due to recent competitive economic conditions and a spike in environmental pressure across the globe, many corporations have adjusted by integrating Corporate Social Responsibility (CSR) initiatives as a strategy to engage wider audiences and positively influence brand equity and performance.

These CSR initiatives also extend to their suppliers, with many organisations opting in to only do business with suppliers that share similar ethics.Today, consumers are engaging with brands that address these environmental issues and incorporate a CSR strategy into their products.

For example, the supermarket industry and the single use plastics controversy saw large organisations such as Woolworths, Coles and Aldi opting to abolish the supply of single use plastics in response to the expectation of organisations to adopt the concept of “transformative business sustainability” throughout their whole operation. In doing this, Saurage-Altenloh , determines that proactively managing these efforts beyond consumers and extending initiatives as an integrated effort with suppliers not only improved brand trust and equity, but also heavily influenced B2B customer loyalty.

Thus, engaging with B2B prospects with a similar ethos favourably enhances customer relationships, preserves supplier reputation with B2B buyers, positively influences brand equity amongst customers, and influences trust in a competitive market . This information cannot be achieved however, without the use of macro and micro techniques in tandem with each other.

Another factor I consider to be crucial when utilising both macro and micro techniques is business growth and stability. A method in which businesses can identify whether a business has sufficient financial stability is again through undertaking thorough research into the desired prospect utilising macro and micro techniques. Stability is particularly important in a business-to-business context as it assists both parties in forecasting and helps manage external disruption in the long term such as changing political policies, tariff increases, and government funding cuts.

According to Business Services: Building Successful B2B Customer Relationships, when segmenting the market for prospective clients it is important to keep in mind that a successful relationship is built on the grounds that there is an ongoing interchange of value and resources amongst both parties, thus, stability is a vital factor to consider as business-to-business buyers are looking for healthy, long-term collaboration.

An example of this is seen with American Express and their business-to-business solutions with many financial institutions and banks around the globe. American express provides a business credit card that offer 30 day payback terms rather than 21 days or less, providing businesses with a sizeable 9 day cash flow float as well as providing business customers with interest free credit periods.

In addition to these services, business customers gain access to their coveted rewards system, which includes discounts and benefits with partnered brands. These business-to-business services allow American Express to charge a yearly retainer fee that their competitors cannot and give the company a stable, consistent cash flow source from their business customers.

This stability in turn allows American Express to create long-standing partnerships with large companies that wish to get access to their client base as well as establish trust with their customers. From the American Express case, it is clear that stability is a crucial factor for businesses to consider as it aids in establishing meaningful business relations and can ultimately determine the survival for some businesses that rely on punctual payments from their vendors.

The last factor I consider as an important factor is development and collaboration within the business that you’re vending your products and/or services to or with. For example establishing a partnership with a company that gives you access to their customer bases through a collaboration in producing a new product, or wholesaling parts for a product such as the Apple and IBM partnership, which saw IBM’s enterprise leading machine learning capabilities being used in tandem Apple’s software and hardware design.

This allowed Apple, a consumer focused company, gain valuable access and insight to the vast enterprise client base and expertise of IBM, while IBM benefits in cutting long term costs by deploying Macs rather than the maintenance ridden PC’s across its entire company.

Another example of this is Afterpay’s services being utilised by many retailers all over the world for online and in-store purchases. By employing Afterpay’s services for a small fee on purchases, retailers benefit from a “buy now, pay later” solution that offers an interest free instalment plan for in store and online purchases. This effective and simple payment method is effective in establishing favourable business-to-business relationships and long-term financial success for both parties.

By evaluating the organisations highlighted in this report what can be assessed is that in all cases, utilising both the macro and micro approach to segmentation is vital in finding an appropriate fit for any business-to-business agreement. Whether the goal is to ensure stable cash flow through strategic partnerships, improving brand reputation and quality or increasing revenue, it is imperative that businesses grasp an understanding of the business market to achieve the highlighted factors. Hence, reinforcing my preference as a marketing manager to utilise both macro and micro bases to segment prospective customers.

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