Sales & Pricing - 1. Segmentation

Flashcards related to market segmentation.

Market Segment

A group of customers with similar needs with respect to products or services offered by a company.

Market Segmentation

Involves matching customer segments to the products offered by a company.

Customer Segmentation

Identifies and groups customers who share common needs or have similar preferences that drive their purchasing behavior.

Selection of Segments

Selecting groups of similar consumers (segments) as targets, typically based on quantitative/financial and strategic analysis.

Marketing to Selected Segments

Presentation of well-defined sales and marketing initiatives to targeted customers, emphasizing a distinct product image or brand positioning.

Demographic characteristics (B2B)

Segmentation based on industry and size.

Behavioral characteristics (B2B)

Segmentation based on purchasing or usage patterns.

Needs-based characteristics (B2B)

Segmentation based on preferences for price versus service.

Demographic characteristics (B2C)

Segmentation based on age, sex, race, ethnicity, income, etc.

Behavioral characteristics (B2C)

Segmentation based on purchase frequency, occasion for usage, loyalty, price sensitivity.

Needs-based characteristics (B2C)

Segmentation based on product performance, durability, ease of use.

Customer Relationship Management (CRM)

Software that helps a company to manage business-customer relationships.

Sales force

A group within a company that conducts sales.

Self-maintainers

Customers who prefer to handle maintenance and servicing independently, often due to in-house expertise, cost-saving motives, or a desire for control.

Benefit optimizers

Customers who seek the highest possible benefit from services—prioritizing quality, efficiency, and uptime. They are willing to invest in comprehensive third-party service packages to ensure optimal performance and minimal disruption.

On-call customers

Customers with minimal operational risk from equipment downtime. Due to low urgency and limited budgets, they invest modestly in external service support and rely on ad-hoc assistance when needed.

Demand customers

Customers with relatively low downtime impact and profit margins, but who are more open to outsourcing service tasks compared to on-call customers—often to save internal resources or reduce complexity.

Commodity trap

Where products and services are distinguishable from one another only on the basis of price.

Target costing

A cost accounting method used to set a target price by subtracting a desired profit margin from a competitive market price.

Buying center

A group of individuals within a company responsible for the company’s purchase decisions.

Porter’s Five forces model

Model with five important indicators that can assist a company to identify the strategic attractiveness of a potential market segment: Competitive Rivalry, Threat of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, and Threat of Substitutes.

Bargaining power of customers

The ability of customers to influence prices and terms, based on their volume of purchases and the availability of alternatives.

Threat of new market entrants

New entrants can increase capacity, drive down prices, and reduce profitability if barriers to entry are low.

Threat of substitute products or services

The availability of similar products limits the price that companies can charge, impacting profitability.

Bargaining power of suppliers

Suppliers can exert power by raising prices or reducing the quality of goods and services, especially if they are few in number or offer unique products.

Competitive rivalry

The influence on profitability by the number and size of competitors, industry growth rate, and product differentiation.