Edited by Gary L. Lilien and Rajdeep Grewal
Chapter 11: Business-to-Business Market Segmentation
Robert J. Thomas Market segmentation is a dynamic business decision process driven by a theory about how markets function. The theory is based primarily on economics literature pertaining to price discrimination developed during the 1920s and 1930s (Chamberlin 1965; Pigou 1920; Robinson 1954) but also has been well received in marketing literature (DeSarbo and DeSarbo 2007; Dickson and Ginter 1987; Frank et al. 1972; Moorthy 1984; Smith 1956). The theory suggests that customer heterogeneity supports the existence of demand-based segments from which firms can generate greater responses by shaping different offerings for those various segments, rather than by providing the same offering to the whole market. As a dynamic decision process, it resides in the domain of managerial decision-making and thus can be improved by concepts, methods and tools developed and tested by academics and practitioners. As a decision process, market segmentation holds the promise of being used in practice by managers of a single firm facing competition to pursue business objectives through a more efficient and effective allocation of resources. This promise appears to have progressed in B2C marketing, where it has become an imperative to know target consumers well and build highly focused marketing programs to meet their needs (Yankelovich and Meer 2006). However, managers in B2B markets have been slower to adopt market segmentation, beyond just traditional industry or application segments. Consider the case of Thomson Corporation, as reported by Harrington and Tjan (2008). A provider of information services to organizational customers, Thomson traditionally marketed to its...
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