● Financial problems
● Production breakdown
● Changes in corporate taxation
These two models illustrate the complexity of the buying process in
organisations. They also give some insights into potential factors that can
be used to identify organisational market segments.
■ Approaches to organisational
market segmentation
Organisational markets can be segmented according to the characteristics
of the organisation, this is sometimes referred to as the macro level.
Factors that would be analysed at this level would be:
● Industry sector: Standard industry classification codes (SIC codes) will
identify an organisation’s primary business activity. Different industry
sectors may have unique needs from a product or service. In the com-
puter hardware and software market, the needs of retailers, financial
services companies and local government will be different.
● Size of the organisation: This can be judged using several variables such
as the number of employees, volume of shipments and market share.
This method of segmentation has to be used with caution, just because
an organisation is large does not mean that it will be a large purchaser
of your product. However, larger organisations will differ from
smaller companies by having more formalised buying systems and
increased specialisation of functions.
● Geographic location: Traditional industries can tend to cluster geographic-
ally, an example being the car industry in Detroit, USA. However, even
emerging technologies show the tendency to locate in the same geo-
graphical area. The UK computer industry has clusters in central
Scotland (Silicon glen) and along the M4 motorway in southern England.
Internationally there may well be different regional variations in pur-
chasing behaviour, for example between Western and Eastern Europe.
● End-use application: The way in which a product or service is used by a
company has an important effect on the way the organisation views its
value. A truck that is used 12 hours a day by a quarrying company
may represent great value. But for a construction company who only
use the same piece of equipment two hours a day it may represent a
much lower value for money purchase. Establishing end-use applica-
tion can help establish the perception of value that will be used in par-
ticular segments.
Organisational markets can also be segmented according to the character-
istics of the DMU, this is sometimes called micro segmentation. The fac-
tors used include:
● The structure of the DMU: This is directly related to the models covered
earlier in this chapter on organisational buyer behaviour. The type of
Segmentation 81