You need to know three types of purchasing information about any business market segment. They are:

• Business Market Segment Based On Purchasing Approaches

• Business Market Segment Based On Purchasing Situation

• Business Market Segment Based On Purchasing Volume and Frequency

Business Market Segment Based On Purchasing Approaches

Business can be segmented by several purchasing approaches. The first is how the purchasing function in the business is organized. Is it centralized in the business headquarters or decentralized through different branches, stores, etc.? Is payment completed by the same people who do the ordering?

In a business segment using centralized purchasing or payment, it can be more difficult to get a contract or purchase, but once you get your foot in the door, it’s easier to maintain the account. Billing, delivery and getting paid are also often easier.

However, centralized purchasing for large organizations can be less personal and difficult for small vendors. Especially if the function that makes purchasing decisions is not the same as the function making payments.

Purchasing Approaches – An Example

For example, in my textbook business I sell to both private and corporate chain college bookstores. When I started in the business, I shipped books with a 90-day deadline for payment. Most of the privately owned stores paid within that time, but the largest chain was always late sometimes taking more than a year to pay. I’ve had the go back two years and verify all my records over that time before the chain would pay outstanding debts for their bookstores.

This large chain was my highest maintenance and the slowest paying customer. Its account executives were difficult to work with and as soon as I established a relationship with one, she would be gone and I had to start all over with another.

Now several of my bookstore customers belonged to the chain. Orders came directly from the bookstores, but payment came from corporate headquarters. The bookstore managers were easy to get along with and nice to deal with, but getting paid by their corporate office was a bear. I eventually starting requiring prepay for all my customers primarily due to the difficulty in collecting from this major chain.

Purchasing Approaches – Your Take Away

If you’re facing a similar situation, you could just segment the corporate stores from the privately-owned stores and treat them differently or just don’t serve the high-maintenance, low- pay customers. But in book publishing, regulations require all bookstores be treated the same. Plus, the stores in that corporation amounted to a large share of my customer base so I couldn’t just segment that business market segment out.

Still this example illustrates many of the purchasing approaches that produce different business market segments that you may want to consider as you make segmentation decisions for your B2B business.

To access my next post on Business Market Segment: Purchasing Characteristics 2, click the link.

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Posted 4-17-08: Business market Segment:

Purchasing Characteristics 1

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This entry was posted on Thursday, April 17th, 2008 at 7:41 am and is filed under Business Market Segments.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.