Unit 4: Segmentation, Targeting & Positioning (STP) in B2B Markets

Market Segmentation in B2B Context

B2B market segmentation is the process of dividing business customers into smaller groups based on similar needs, characteristics, or buying behavior to design suitable marketing strategies.

Why Segmentation is Important in B2B?

• Business customers have different purchasing needs.
• Helps in customized product/service design.
• Improves resource allocation and sales efforts.
• Increases profitability by focusing on high-potential segments.

Basic Framework of B2B Segmentation

B2B segmentation uses more complex variables than B2C. It includes macro-level and micro-level segmentation.

1. Macro Segmentation (Broad Level)

These variables describe the company you are targeting.

a) Demographic Variables

• Industry type (Manufacturing, IT, Banking, Retail)
• Company size (Small, Medium, Large)
• Location (Local, Regional, National, Global)

b) Operating Variables

• Technology used
• User status (Non-user, Light user, Heavy user)
• Production process (Automated, Manual)

c) Purchasing Approach

• Centralized vs. decentralized purchasing
• Formal or informal purchase process
• Relationship-based or price-based buying

d) Situational Factors

• Urgency (Regular vs. emergency purchase)
• Order size (Bulk, small quantity)
• Application of the product

e) Organizational Characteristics

• Culture (Innovative, traditional)
• Structure (Flat, hierarchical)

2. Micro Segmentation (Narrow Level)

These variables describe people inside the organization who make buying decisions.

a) Decision-Maker Characteristics

• Role (User, Influencer, Buyer, Decider)
• Risk attitudes
• Experience

b) Personal Characteristics

• Personality
• Motivation
• Loyalty to the supplier

c) Buying Behavior

• Price sensitivity
• Desired benefits (quality, service, speed)
• Supplier loyalty

Selecting Target Segments in B2B Markets

After segmentation, the marketer must select which segment to serve.

Criteria for Selecting Target Segments

1. Segment Size & Growth = Large enough and profitable
2. Accessibility = Easy to reach through sales channels
3. Measurability = Data about the segment should be available
4. Compatibility = Should match company's resources and strengths
5. Competitive Intensity - Less competition = better opportunity
6. Stability = Segment should be stable for long-term business

Types of Targeting Strategies in B2B

1. Undifferentiated Targeting – same marketing mix for all segments
2. Differentiated Targeting – different strategies for different segments
3. Concentrated (Niche) Targeting – focus on a specific segment
4. Customized Marketing – tailor-made solutions for each customer (common in B2B)

Positioning Strategies in B2B Markets

Positioning = How the company wants to be perceived by business customers.

Steps in B2B Positioning

1. Identify customer needs
2. Analyze competitor positions
3. Choose competitive advantage
4. Develop a positioning statement
5. Communicate through marketing mix

Common Positioning Strategies in B2B

1. Product/Service Quality Positioning

• High precision
• Durability
• Reliability

• Example: Siemens industrial machines

2. Price-Based Positioning

• Low cost
• Value for money

• Example: Basic raw material suppliers

3. Innovation Positioning

• Advanced technology
• New features

• Example: Cisco networking solutions

4. Service Excellence Positioning

• Quick deliveries
• Customized service
• 24x7 support

• Example: IBM and SAP

5. Relationship-Based Positioning

• Long-term partnership
• Trust and loyalty

• Example: B2B logistics providers

6. Solutions-Based Positioning

• Offering complete end-to-end solutions
• Example: TCS, Infosys

Short Example for Understanding 

Case: A company selling industrial water purifiers

Segmentation:

• Macro: Industry type (Pharma, Food Processing, Chemicals)
• Micro: Decision-maker role (Plant Manager)

Target Segment: Medium-size food processing companies in metro cities

Positioning: “Reliable, high-efficiency water purification systems designed for food safety compliance.”

Pricing Strategies in Business Markets (B2B Pricing)

B2B pricing is more complex because business buyers focus on:

• Cost
• Value
• Long-term relationship
• Customization
• Tender/Bidding rules

Key B2B Pricing Strategies

1.1 Cost-Based Pricing

• Price = Cost + Margin
• Used when production cost is predictable.
• Example: Manufacturing components, machinery.

1.2 Value-Based Pricing

• Price set according to value delivered to customer, not production cost.
• Example: Software, automation tools, specialized services.

1.3 Competition-Based Pricing

• Price based on competitors’ prices—common in commoditized markets.
• Example: Steel, cement, raw materials.

1.4 Bid/Tender Pricing

• Price set through competitive bidding for government and large institutional buyers.
• Example: EPC projects, defense procurement, government supply.

1.5 Volume Pricing / Quantity Discounts

• Lower price for bulk orders.
• Example: Wholesale supply, industrial raw materials.

1.6 Tiered Pricing

• Different price tiers based on package or service levels.
• Example: SaaS tools (Basic, Pro, Enterprise).

1.7 Relationship Pricing

• Special price for long-term customers.
• Example: Annual supply contracts, AMC contracts.

1.8 Lifecycle Pricing

• Different price at different stages of product’s life cycle.
• Example: Tech products, industrial equipment.

B2B Advertising Techniques

B2B advertising focuses on logic, data, trust, and long-term value.

Major Advertising Techniques

2.1 Trade Journals & Industry Magazines

• Business Today
• Economic Times
• Chemical Weekly - Common for industrial buyers.

2.2 Trade Shows & Exhibitions

• Companies display products to industry buyers.
• Examples: Auto Expo, Plast India, FoodTech Expo.

2.3 Digital B2B Advertising

• LinkedIn Ads
• Google Search Ads
• Email Marketing
• Whitepapers
• Case Studies
• Webinars
• SEO for industrial buyers

2.4 Direct Selling Content

• Brochures
• Catalogues
• Technical sheets
• Product demos

2.5 Relationship-Based Advertising

• Sponsorship of industry events
• Business Networking
• Distributor programs

Competitive Bidding Process (Tender Process)

Used mostly by government organizations, large corporations, and public institutions.

Steps in Competitive Bidding

Step 1: Bid Invitation (RFP/RFQ Release)

Government or company releases:

• RFP (Request for Proposal)
• RFQ (Request for Quotation)
• E-tender online

Step 2: Bid Preparation

Vendor prepares:

• Technical offer
• Price offer
• Company profile
• Certifications
• Delivery timeline

Step 3: Bid Submission

Upload on portal or submit sealed documents.

Step 4: Technical Evaluation

Only technically qualified bidders move ahead.

Step 5: Financial Evaluation (L1 System)

Lowest price bidder (L1) is usually selected (especially in government tenders).

Step 6: Contract Award & Agreement

PO (Purchase Order) released; vendor starts work.

Step 7: Performance Monitoring

Quality control + delivery tracking.

Relationship Marketing & CRM in B2B

B2B relationships are long-term, trust-based, and high-value.
So companies focus on Relationship Marketing + CRM systems.

4.1 Relationship Marketing

Building long-term profitable relationships with customers.

Key Tools:

• Regular meetings
• Technical support
• After-sales service
• Loyalty benefits
• Customized solutions
• Dedicated account managers
• Joint problem solving

4.2 CRM (Customer Relationship Management)

CRM = Software + strategy to manage customer data and strengthen relationships.

Functions of CRM

• Store customer details
• Track leads and sales
• Manage communication
• Automate follow-ups
• Analyze customer behavior
• Improve customer satisfaction

Examples of CRM Tools

• Salesforce
• Zoho CRM
• HubSpot
• Microsoft Dynamics

Mini Case Studies 

Case Study 1: Value-Based Pricing – Caterpillar Inc.

Caterpillar sells heavy machinery at a premium price.
Why?

• High durability
• Lower lifetime cost
• Better service network

Customers are willing to pay more → Example of value-based pricing.

Case Study 2: B2B Advertising – Tata Steel

Tata Steel advertises in:

• Industrial magazines
• Trade fairs
• Supplier conferences

Focus is on strength, efficiency, and reliability → typical B2B advertising.

Case Study 3: Competitive Bidding – L&T

L&T wins government contracts through tender bidding.
It focuses on:

• Strong technical proposal
• Competitive pricing
• Past performance record

Shows how tender processes work.

Case Study 4: Relationship Marketing – IBM

IBM assigns account managers to major clients.
They offer:

• Customized solutions
• On-site support
• Long-term contracts

This builds loyalty and high switching costs.