A new macro-level segmentation model for business-to-business marketing

Date of publication: June 15, 1994

Author: Geoff Alford


In consumer markets, marketers and researchers have traditionally used demographics (sex, lifecycle, income, socio-economic class) to segment markets. Other segmentation bases have been proposed and used (psychographics, values), but "demographics" still remain the fundamental basis for segmentation for a host of consumer products and services. In the last 20 years, however, a huge business market has developed, namely "the business office", which is independent of industry type (all types of organization, Private and public, industrial and service-oriented, large and small, have a "business office"). This market encompasses the need for telecommunications, business computing technology, business finance, business travel, couriers, management services, government services, office furniture and consumables, and so on. Indeed, the generic "business office" might also be called the "business consumer market" (meaning all businesses), analogous to the traditional people-consumer market. What then are its relevant demographics? This question is important to business-to-business marketers because, while it is easy to target key "business office" customers (namely, large organizations with thousands of employees), it is difficult to determine a cost-effective strategy for segmenting marketing effort for the mass of small businesses. In Australia and similar countries, 90% or more of businesses are small, with fewer than 10 employees. To highlight this challenge, imagine the benefits to business-to-business marketers if they were able to readily obtain a list of the mass of small businesses, which identified which ones represented a significantly greater potential for particular "business office" products and services. Through an associated market research company (Geoff Alford Research Services), we have developed a business-to-business segmentation model, which has theoretical grounding, and which has been tested in business banking, telecommunications, and computing markets. Using multi-way ANOVA, it has proven to be a powerful discriminator across a range of generic business products and services. The relevant demographics in the segmentation base include a business-size, (number of employees), internal affiliations (sole or multiple locations), customer base (other businesses versus members of the public), customer location (local versus national) and the typical number and value of its commercial transactions.

Geoff Alford


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