Selecting the best business market segment based on purchasing approaches was the subject of yesterday’s post. Today I’ll continue covering purchasing characteristics with the two below:

• Business Market Segment Based On Purchasing Situation

• Business Market Segment Based On Purchasing Volume and Frequency

Business Market Segment Based On Purchasing Situation

Purchasing situations deal with each business market segment’s needs. Some need quicker deliveries than others. Some need more consulting than others. Some prefer to buy online while others prefer to order by telephone or fax.

Business Market Segment: Purchasing Characteristics – An Illustration

To illustrate purchasing situations, let me provide another example from my business, but this time using it as a business customer.

My business uses lots of ink toner cartridges. I used to buy cartridges at local business supply stores, but found it too time-consuming and unreliable because often I’d have to got to several stores to find the cartridges that I use.

Then I started purchasing online. I tried several suppliers, with unsatisfactory results before I discovered my present supplier Laser Monks. I love this company for several reasons. One, they keep records of the cartridges that I use. Two, I don’t have to find my cartridges and complete a form. I can just call them tell them which printer I need cartridges for, give them my credit card information and they do everything else. Three, they provide good service and fast delivery. Four they often run specials and send thank-you gifts. In other words they meet my needs.

In addition to meeting these practical needs, I feel good about spending my money with Laser Monks because real monks run it and all the “profit” goes to social causes. So, doing business with Laser Monks also meets my need to help others. Plus they are price competitive.

I like everything about Laser Monks, and I tell other business people about them and send business their way. Not because I make money from recommending them. I don’t, but because I’m such a happy customer that I want to spread the word.

If you can match your business with the purchasing situation and needs of a business market segment of customers, you can also develop loyal customers who will evangelize about your business.

Business Market Segment Based On Purchasing Volume and Frequency

Some consistently make small orders while others consistently make large orders. Some may order only one product in your product line while others may consistently buy several products. Some order often while others order infrequently.

You can distinguish business market segments by purchasing volume and size to determine the one that provides your best customers and target market. Using the old 80/20 rule, you may realize that 20 percent of your present customers account for 80 percent of your sales. Identifying that business market segment and concentrating your marketing efforts on other businesses within that same segment reveals your most profitable target market. Concentrating your marketing efforts on that business market segment will increase return on your marketing investments.

Keeping good records is a prerequisite for any market segmentation program. In order to
determine the business market segment that provides most of your sales, you have to look at your customer records, separate your customers into business market segments by purchasing characteristics, and determine the characteristics that relate to the most profit.

Then take good care of those customers, giving them extra attention or gifts. Look for new customers with these same characteristics and cater your marketing efforts to this target market.

Business Market Segment: Purchasing Characteristics Conclusion

Selecting a business market segment based no purchasing characteristics is an easy way to use market segmentation. First because, you already have records to determine which characteristics produce the most profitable business market segment. Second because once you know characteristics that identify that best segment, you can target other businesses with similar characteristics to increase your customer in that business market segment.

To link to the next post in this series, click below:
Business Market Segment Decision Maker Characteristics 1

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Posted 4-18-08: Business market Segment:

Purchasing Characteristics 2

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Finding the best business market segment for your B2B business involves considering organizational, product, and purchasing characteristics of potential business customers.

This post covers purchasing characteristics, part 1, or the first purchasing characteristic in the list below. Tomorrow’s post will cover part 2, characteristics 2 and 3 from the list below. Friday’s post will cover selecting a business market segment based on decision maker characteristics.

Business Market Segment: Three Types Of Purchasing Information

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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