Emotional factors tend to play a significant part in a consumer’s decision to purchase a product. This is not the case in the B2B context, where decisions are based around the task and the product. Business customers are generally looking for specific product attributes that will offer efficiency, productivity and quality. B2B purchasing decisions require more money and risk to the organisation, so therefore are more rational that consumer decisions.
Marketing techniques used between B2C and B2B vary accordingly. By gaining an understanding about the segmentation approaches which are appropriate to the market, a business can create better and more effective marketing. Some techniques are equally applicable to both B2C and B2B. For example, analysing historical data of the frequency and value of sales is a good method of basis for an in-house mailing list, regardless if the basis is consumer or business focussed.
B2C marketers have a large range of possibilities to form a basis for market segmentation. Research tells us that similar people do similar things. For this reason, if we know the type of people buy our products, it would be in the business’ interests to find similar people and offer products and services to that group as well. This is where the ACORN system comes into play. The ACORN classification is geodemographic system which has been used by marketers for decades to segment markets based on the demographics of where they live. It takes into account a large range of data including Census data and lifestyle surveys. The basis for ACORN is formed on the basis of a postcode and categorises major postcodes into groups of which have similarities. A real life example of ACORN is where a promotion works well in Cambridge for example could be extended to Richmond-Upon-Thames. Although not geographically close, both towns are in the same ACORN group which suggests the residents of the area have similarities.
The official definition of ACORN, from the creator’s website states;
“Acorn is used to understand consumers' lifestyle, behaviour and attitudes, together with the needs of communities and is important to both private sector and public service organisations. It is used to analyse customers, identify profitable prospects, evaluate local markets and focus on the specific needs of each catchment and neighbourhood.”
Dividing a market in accordance to when people buy is also an effective strategy. In B2B this can be particularly effective. Most companies have their own accounting year and capital is more likely to be available at certain periods of time than at others. Understanding when these periods occur for each potential customer can result in success or failure. Unfortunately this technique cannot be applied to B2C marketing as knowing the financial cycles of consumers as opposed to businesses is pretty much beyond most marketers, although seasonality in general should be considered in marketing plans.
The techniques used by companies for both B2C and B2B vary significantly. Figure 1 shows results from a survey undertook in order to establish an understanding of which marketing techniques are most effective for both B2C and B2B.
From this research it is clear to see that the most effective marketing tactic for both B2B and B2C is Email Marketing. However this is where similarities end as Content Creation and Lead Management are much more effective for B2B than they are for B2C.
The decision making unit (DMU) in business-to-business markets is highly complex or at least it has great potential to be.
Ordering basic products with low value such as office stationary may well be the responsibility of the new boy. However, the purchase of new machinery that is vital to a business may involve a large team who makes their decision following strict guidelines and procedures. There are a number of target audiences for B2B communications. It is made up of groups of constantly changing and dynamic individuals with different interests and motivations. Buyers are always seeking a good financial deal. It is important to have a variety of people in the DMU as each person will make a contribution to the decision through their own thoughts and opinions and this can create interesting variations to the selection of products and suppliers.
The profiles of 6 target groups across 3 companies
Apple is a large multinational organisation which specialises in personal technology such as mobile phones, computers, laptops, music players and tablets. Apple segment their markets based on demographics and behaviour. It is evident that behavioural patterns in society are changing with the use of technology in all areas on the rise, especially in education. Apple’s products are targeted at the higher end of the market; therefore Apple targets people with a larger disposable income.
Consumer market (Young Adults)
One of the main target groups that Apple target are young adults (16-25). Young people generally are more likely to purchase the products because they will use the technology for various purposes; education, leisure and work. There are wide ranges of products such as the iPad which can be used for a wide range of purposes such as schoolwork, communication, leisure and has the functionality of a normal computer. Another product is the iPhone which is a multipurpose smartphone; again it can be used for a large number of purposes including work, communication and leisure. It is also said that Apple products are very fashionable and gives the user a “status” as the connotations of Apple products generally portray that the user is affluent. In addition, young people are more likely to purchase the products as they have more disposable income as they probably will not have the responsibility of a child and most likely living at home.
The market is very accessible as young adults generally have access to all forms of media channels including the internet such as social networking, YouTube and email. Social networking is very effective in reaching out to the younger target markets as a result of the widespread use of this technology. In addition, the market is generally very mobile and more likely to have opportunities to see marketing campaigns through billboards, vehicles and shops. A wide range of marketing communications is therefore very effective in reaching this target market.
Apple will have to consider the current and future prospects of this target group. Overall it is perceived that this group will create a good return currently and in the future. In order to ensure that the market will continue purchasing Apple products in the future, they need to carry on developing their products and staying ahead of competitors.
It is envisaged that this market will be highly profitable as the segment is large and is growing in size. It has the capacity to gain loyal customers as technology advances.
Apple Mission Statement
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.”
The mission statement fits in well with the target market because this target group always want the latest technology. Apple’s mission statement implies that they are leading innovation in technology and revolutionising the way we use technology. This appeals to young adults as Apple fulfil the needs and wants of the segment; who are wanting the most up to date technologies.
Business to Business market (Education)
Another segment that Apple is attempting to target is the education industry (schools, colleges and universities). The reason for this is Apple have identified the opportunity for technology to be used in classrooms to enhance student learning. The education industry is generally accessible as Apple can directly approach schools and supply the products through third party suppliers which specialise in equipment for schools. The current prospects are good as many schools are investing in the products and spending up to £500,000 on the products. It is thought that technology is going to be more widely used in the classroom in the future, especially as technology advances and economies become stronger.
As schools and institutions purchase products in high quantities, Apple can offer them a more attractive price especially in the higher education industry. Universities and colleges are constantly looking to improve resources and invest in new technologies. The education industry is huge, not just in the UK but worldwide and is very profitable as governments are slowly increasing spending on education and investing in new technologies. Likewise with young adults, the mission statement fits in well with the target market because this segment is dependent on Apple’s specialised technology. Apple’s mission statement implies that they are leading innovation in technology and revolutionising the way we use technology. This appeals to the education industry as Apple fulfil the needs and wants of the segment; who are wanting the most up to date technologies in order to fulfil their requirements.
British Airways is the flag carrier of the United Kingdom specialising in upmarket long-haul flights and short haul domestic and international routes. The airline have operations in many countries, specifically targeting the US and UK. Through their own network of flights and via the Oneworld alliance scheme, British Airways can offer a worldwide service. BA segment their market based on demographics of their customers. BA is an upmarket airline with prices that reflect the quality and luxury of the product, it is therefore evident that British Airways will segment their consumer market based on the demographics of consumers, this will mainly be based on a person’s income however other factors such as where they live, age, religion, race and occupation will be taken into consideration. British Airways offer a large number of different air travel services all targeted at different segments of the market.
Consumer market (Tourists, holiday makers, common market customers)
British Airways’ main product is flights around the world however they have recently started to offer holiday packages in order to compete with the traditional travel agent. Generally people who are planning to go on a holiday have a disposable income and BA will segment the market based on demographics and the ACORN and MOSIAC systems will be utilised effectively by BA. BA is generally referred to as an upmarket airline providing a completely different service to that of EasyJet or Ryanair. An airline such as EasyJet will segment their market to include people who are looking for cheap flights to Europe and are not worried about quality of the service. On the other hand BA will target the segment of the market who are looking for flights to Europe and intercontinental and are prepared to pay for a good quality service.
- Common market customers (Middle class, affluent passengers)
Customers who are looking for a high quality product, but do not want to pay ridiculous prices to travel. These customers are likely to want to travel in Economy class to travel to their destination, if the destination is short haul, BA must try to retain these customers and keep prices competitive in order to prevent them from being tempted at going to a budget airline who could be offering much cheaper prices as these customers may have the tendency to switch if the offer is attractive. The market is particularly accessible as travellers are generally very mobile and use the internet to purchase and compare flights. By using social media and travel sites, BA can communicate effectively with this segment. Marketing campaigns should be targeted to this segment as common market customers are the most profitable and are largest in size. This segment encompasses all types of passengers which includes the reason for travelling; this could be for holiday purposes or leisure (VFR, visiting friends and relatives)
- First class passengers
A large number of British Airways’ services are targeted at wealthy customers who have a considerable amount of money to spend but are very demanding and expect a very high quality service. First class consists of a truly luxury travel experience which appeals to people who have the money to spend on the service. Geo-demographic segmentation will certainly be used in this context to target customers who reside in wealthier areas of the UK. Likewise with the common market segment, BA can use effective communications to interact with this segment through the use of social media and specific travel websites as typical travellers will use the internet to compare flights and read reviews for example. On the other hand, this segment of the upper end of the market is not as profitable as common market customers and is more niche in comparison.
Image source: Department for Transport ()
The current and future prospects for both segments is overall very positive as air travel has been on the rise in the last 10 years, however has slowly been decreasing after its peak between 2005-7. This could be a result of the economic situation which has resulted in consumers not having as much disposable income as previously.
BA Mission Statement
British Airways mission statements are 'One Destination seeks to ensure our customers fly confident that, together, we are acting responsibly to take care of the world we live in.' BA has been redefining the vision, and making sure it is successfully carried out throughout the organization, and hence led to corporate success. The mission is, of course, wider than being merely an airline with good customer relations and service.
It is evident that the mission statement of BA fits in with the needs and wants of the target market, British Airways’ customers as the company is demonstrating that they are a responsible airline that is committed to providing an excellent service and this therefore meets the needs and requirements of their respective target markets.
Business markets (Business travellers)
One of BA’s biggest business markets is the vast amount of business travellers that use British Airways in order to travel to destinations all over the world. BA have products and services which are specifically designed for business travellers in mind which includes “Business class” on all short and long haul flights which is designed to give travellers a comfortable environment to carry out work and relax. In addition BA has a subsidiary named “BA Cityflier” which specialises in shorthaul flights from London City Airport which is designed for business travellers in mind. Businesses are always looking for a good deal and have arrangements in place with BA to purchase flights at competitive prices at short notice as business travellers do not have a great deal of flexibility and BA must cater for the needs of business customers.
LA Fitness, a large health and fitness chain in the UK have a large number of customers from a large number of different markets. Their market is segmented mainly on a psychographic basis. Psychographic segmentation takes into account factors and variables such as age, personality, beliefs and attitudes.
Many gyms and fitness centres use psychographic segmentation to market the products and services effectively to people that are most interested. In this context LA Fitness market their products in particularly to young males in the 18 to 34 age range, as they are most interested in the products and services that are offered. Communicating with this segment is effective as there are many forms of media which focus on this interest including websites, social media pages, magazines and mobile apps which are widely used by the identified segment. Profitability of this segment is high and customers are prepared to pay high amounts for the service. Current and future demand levels will likely to remain stable and have the potential to increase.
Age is often a strong determinant of product choice in the health industry
Health club/gym example...
Goal is to ‘look good’
To help ‘deal with stress’
Aged 55 and over
For ‘medical-physical therapy’
Business markets (Corporate memberships)
Corporate gym memberships are becoming more and more popular among businesses and LA fitness is meeting the needs of businesses by providing corporate memberships at highly discounted rates. This appeals to businesses for a variety of reasons such as; healthy employees are more productive, a healthy workforce results in reduce healthcare costs and the non-financial benefits include having an engaged team and positive brand.
Why is segmentation so important?
There are a number of reasons why a business needs to segment a market which is explained below;
More effective in meeting customer needs
Different types of customers require different needs. Creating bespoke offers for each segment makes sense and provides customers with a personal solution.
Increased profits for business
Customers have different demographic properties. Therefore they are different in how sensitive they are to price. Segmenting markets will enable businesses to raise average prices and subsequently further increase profits
Increase customer loyalty
Circumstances change regularly in customers’ lives. For example people grow older, create families, change jobs or get promoted, change their buying patterns. Through effective marketing that markets products that appeal to customers at different stages of their life, a business can retain customers who might otherwise have the tendency to switch to competitors’ products and brands.
Target marketing communications
It is necessary for a business to consider the needs of all audiences. If the target market is too vague, the potential for customers to be missed out and the cost of communicating to customers becomes unprofitable. By segmenting markets, the target customer can be targeted more cost effectively.