Strategy-Based Segmentation of Industrial Markets

Segmentation of industrial markets is typically based on observable characteristics of firms such as their location and size. However, such variables have been found to be poor predictors of industrial buying behavior. To improve the effectiveness and power of existing approaches to industrial market segmentation, we propose using unobservable characteristics such as organizational strategy in addition to the observable characteristics currently used. An important justification for our approach is that a firm's strategy influences its behavior, especially its buying behavior; as a result, adding the strategic type and orientation of firms to a segmentation scheme is bound to improve the effectiveness of the scheme. To test the effectiveness of our approach, we conducted an empirical study of the purchase of car phones by 200 Dutch firms. The results support our predictions. In fact, they indicate that a firm's strategy is an even more important determinant of industrial buying behavior than the variables currently used. Thus, strategy-based segmentation may be a more powerful and effective approach to industrial segmentation than current approaches.