Market Segmentation
Demand Forecasting
Learning Objectives ….
1. Explain business market segmentation
requirements and benefits
2. Compare the different bases for segmenting
business markets
3. Contrast specific methods of forecasting business
demand
Business Market – Segmentation
A market segment represents “a group of present or potential customers with
some common characteristic which is relevant in explaining (and predicting)
their response to a supplier’s marketing stimuli”
Right Market Segmentation will help in deciding an efficient Mktg. Mix and
help developing a robust strategy for customer acquisition
Business Market- Requirements
Business Market Segmentation- Benefits
Industry Classification Systems - India
Similar to North American Industry Classification System ( NAICS) , India has
its own Industry Classification System called “National Industrial
Classification ( NIC)” issued by Ministry of Statistics & Program
Implementation ( MoSPI)
It uses the data from Ministry of Corporate Affairs & Udyam ( MSME)
Registrations
Structure : 5 Digit Code : Section/ Division/Group/Class/Sub Class for
classifying Business Establishments and economic activities
Harmonised Systems ( HS) in India issued by DGFT for goods coming under
Export & Imports
GST HSN ( Harmonised Systems of Nomenclature) /SAC ( Service Accounting
Codes) classifies Goods & services under GST Regime
Bases for Segmenting Business Markets
Macro-segmentation centers on the characteristics of the buying organization
and the buying situation and thus divides the market by such organizational
characteristics as size, geographic location and organizational structure.
Micro- segmentation requires a higher degree of market knowledge, focusing
on the characteristics of decision-making units within each macrosegment—
including buying decision criteria, perceived importance of the purchase,
attitudes toward vendors and personal characteristics.
Bases for Segmenting Business Markets
Macro Level Bases of Segmentation
Value in use is a product’s economic value to the user relative to a specific
alternative in a particular application ( As Per NAICS )
Micro-Level Bases of Segmentation
Selected Microlevel Bases of Segmentation
Key Criteria – Approach to Micro Level
Bases
Purchase Decision Criteria : Product Quality, After Sales Service, Relible
Delivery, Technical Support , Price & Supply Continuity
Supplier Profile Criteria :
(A) Program Buyer : Not price sensitive or service sensitive – Buying as a matter
of continuity of past ongoing relationship/policies e.g DGS &D Rate Contracts
(B) Relationship Buyer : Long standing relationship with the Seller Organisation
(C) Transaction Buyers : Large Segment . Consists of knowledgeable customers
who consider price vis-à-vis trade offs , service considerations
(D) Bargain Hunters : Large volume Buyers who are sensitive to both Price &
Service
(E) Value Based Strategic Buyers : Highly innovative buyers who try to develop
synergy with Business Maketing firms to give Unique offering to consumers for
gaining competitive advantage e.g Direct Import of ATF by Indigo with the help of
RIL
Purchasing Strategies- Microsegments
Microsegments are classified based on Organisation’s Buying Strategies
(A) Multiple Supplier strategy with reverse auctions for specific periods
(B) Single or specific contracts with Quantity Allocation & Formula Pricing
(C) Tenders & Procurements on L1 Basis
(D) Negotiated Contracts
(E) Declared Price basis
(F) Toll Gating or Contract Buying
(G) PPP Models
(H) BOT Model ( build –Operate – Transfer)
Structure of Decision Making Units
Purchase Organisations with CPO , Buyers & Team
Decision Makers/Influencers/ Back Office/ Commercial /
Gate Keepers
Technical Evaluation Cell
Commercial Evaluation Cell
Legal & Compliances Cell
Logistics & Supply Chain evaluation
Choosing Market Segments
If business marketers cannot develop a distinct strategy based on the
macrosegment, then it may be necessary to undertake research on micro
segmentation variables within each macrosegment.
• Innovate Through Segmentation!
• Account-Based Marketing
Account Based Marketing : A very common approach due to markets getting
highly competitive & Buyers wanting to have specific solutions at a spee
Profitability Based Marketing :To improve on traditional market
segmentation, many business marketing firms categorize customers into tiers
that differ in current and/or future profitability to the firm.
• Implementing a Segmentation Strategy
• Estimating Segment Demand
The Role of the Demand Estimation
Estimating demand within selected market segments is vital to
marketing management.
• Laying the Foundation
• Setting the Course
• Supply Chain Links
Significance of Accuracy of Demand Forecasting : Prevents Losses/
Job Cuts/ Labour Unrest etc./ Brand Credibility / Market reputation
Bottom-Up Approach for Demand Forecasting ( Buyers Market )
Top Down Approach for Demand Forecasting ( Sellers Market – Supply
Constraints)
Cash to Cash Cycle ( CTC) – Projections become realistic
Methods of Forecasting Demand
Methods for Forecasting Demand
Qualitative Techniques
Management judgment: Qualitative techniques that rely on informed
judgment and rating schemes.
Subjective techniques: Synonymous with management judgment this uses
qualitative techniques that rely on informed judgment and rating schemes.
Qualitative Techniques
Executive judgment method: The judgment method that combines and
averages top executives’ estimates of future sales and is popular because it is
easy to apply and understand and enjoys a high-level usage.
Sales force composite: An approach where salespeople can effectively
estimate future sales volume because they know the customers, the market,
and the competition.
Delphi approach to forecasting: The opinions of a panel of experts on future
sales are converted into an informed consensus through a highly structured
feedback
Quantitative Techniques
Time-series analysis: A technique that uses historical data ordered
chronologically to project the trend and growth rate of sales. The rationale
behind time-series analysis is that the past pattern of sales will apply to the
future.
Regression analysis: A process that identifies factors that have affected past
sales and incorporates them in a mathematical model to estimate future
sales.
Causal analysis: Another name for regression analysis, causal analysis
identifies factors that have affected past sales and incorporates them in a
mathematical model to estimate future sales.
Combining Several Forecasting Techniques
Recent research on forecasting techniques indicates that
forecasting accuracy can be improved by combining the
results of several forecasting methods.
The results of combined forecasts greatly surpass most
individual projections, techniques, and analyses by
experts.
Research suggests that managers should use a composite
forecasting model that includes both systematic
(quantitative) and judgmental (qualitative) factors.
AI-Powered Sales Forecasting Tools
Predictive sales analytics uses productive algorithms and patterns in
historical data (typically gathered from a firm’s CRM software) to create
forecasts, anticipate prospects’ buying behavior, and inform targeted
marketing communications strategies.
AI-powered sales forecasting tools allow a firm to
• More accurately gauge the relative attractiveness of customer leads for a more
reflective and efficient sales strategy
• Maximize a customer lifetime value
• Promote customer retention
Salesforce Einstein is able to take advantage of its enormous user base by
analyzing every action taken to continue to improve its capabilities, which
provides users with more accurate analysis as it continues to learn.
Represented here is the power of machine learning—computer algorithms
that can improve automatically through experience and by the use of data.
THANK YOU