Monthly Q and A

October Question of the Month

At the highest level, what are the three strategies for segmenting your market?

Our experts answer...

1-Differentiated Market Segmentation - If you actively market a product/product line or services to two or more segments of the market based upon varied customer needs, you are using a differentiated strategy. We are talking here about customer-oriented segments or a strategy that is dependent upon market demand.

2-Concentrated Market Segmentation - This strategy means that you have segmented the market, but decided to serve only one of several potential segments. If you produce electronic components, you may have decided to go after the broad market of small consumers and therefore sell primarily through electronic distribution. If you produce uniquely small and less expensive semiconductor tools that can be placed in multiple places throughout a fab in place of one large tool, customers with existing fabs that are expanding may be your market segment.

3-Customerization Market Segmentation - this segmentation approach has been receiving increasing attention in technology markets. Known as Interactive Segmentation, Micromarketing, Atomization and Asmany other names by different authors, it basically means that the market is broken down to one-to-one marketing, or the finest level of detail – the individual customer. This can be a stand-alone segmentation approach or used in conjunction with the other two types of market segmentation.

Coming in November...

Do you pay attention to proxemics – honoring the amount of space that people feel it necessary to set between themselves and others?

Come back in November to learn the answer to this question.

Past Questions and their Answers

2017

September The main cultures involved In the semiconductor industry are the U.S., German, French, Japanese and various countries with a Chinese-based culture. In terms of how trust is developed, which of these cultures is closest to the U.S.?
A: German is the closest. In both the U.S. and Germany, the development of trust comes from performance to the task. In all the other cultures, relationships determine the level of trust. In France there is more of a balance between relationship and performance to the task, but relationship still slightly wins out.
August Where can I find out useful information about a current or potential customer?
A: The most obvious and immediate sources would be the customer’s website, annual reports, searching Google or Bing, trade publications, etc. However, one very valuable source is not used by quite a few professional sales and marketing people. If your customer trades on any of the American stock exchanges (many non-American companies do), they are required to file regular reports with the Securities Exchange Commission (SEC). You will find those reports listed on the Edgar Database and they disclose all kinds of information related to the company’s internal functioning, direction, and challenges faced in the marketplace. You can access these reports by going to www.sec.gov and then putting Edgar in the search box.
July As a technical member of an account team, what are the important non-technical rules I should follow?
A:

Keep in mind that the account manager is ultimately responsible for the account relationships, profitability, etc. He or she looks to you for valuable contributions, but always follow the account manager’s lead.

Do share suggestions . . . and criticisms with the account manager. Even engage in non-personal constructive conflict if you disagree with something. But, always do so internally, never in front of customer personnel.

Be careful in discussing new products with the customer. Always take guidance of what you can discuss from the account manager.

Follow the account manager’s plan in sales calls, customer visits, and with other customer contacts. Don’t introduce new subjects or questions in front of the customer.

June What are the three conditions that are crucial for success when defining a new product?
A: The three conditions are:

1. A real need - Ensure that you have a truly defined customer need that that is sufficiently large to offer good profitability.

2. A reliable product - Make sure the new product will reliably meet the defined needs of the customer.

3. A growing market - Your prospects for long-term success with a new product should offer substantially increasing market size.

If these conditions can be met, you have a reasonable chance of success. Otherwise, there exists a high probability of failure.

May When looking at an industry life cycle there are several sequential stages – embryonic growth, shake-out, mature and declining. In what stage is the semiconductor equipment and materials industry currently in and what are the characteristics?
A: The industry is in the shake-out stage and rapidly moving to the maturing stage. While we are still growing, the growth rate is slowing down substantially. Instead of growing at double digits, we are growing just above the worldwide GDP rate. For equipment, the CapEx spending as a percentage of customer sales is decreasing. The materials segment is less volatile than the equipment segment, but the same trend applies in terms of growth. A few firms supply products to the majority of the market, they have to make huge capital investments ($10B fabs), and they own IP or trade secrets which give them exclusive rights to produce a particular device using a particular production process.
April How would you define the purpose of strategic marketing?
A: Generally speaking, the goal of strategic marketing is to improve the firm’s overall competitive position and profitability. This is in contrast with the goal of product marketing, which is to improve the product’s competitive position and profitability. The focuses is on any disruption that can fundamentally change where, how and when to compete. The disruption can come from a customer, a competitor, or a new technology, whether internal and external. In other words, any major change in the environment that can force you to change your existing product strategy and plan should be managed. Note that we are talking about major changes, NOT incremental changes.
March Under what circumstances is it best to use reps/distributors as opposed to a captive salesforce?
A: The value of reps/distributors is highest when a company is new and small. They can provide three extremely important capabilities that are nearly impossible to economically replicate when a company to is in the start-up phase. These are access, credibility, and local knowledge Access means the capability to quickly get you and your product in front of the key decision-makers in the customer base. Credibility comes from success with other products at the customers' sites and is transferable to you, simply by virtue of your association with the trusted rep. Local knowledge means account knowledge based on experience and relationships established over time. It takes many years of successful business dealings with each account to duplicate these capabilities.

There are circumstances when reps/distributors could also be important for well-established, large companies that lack the above three capabilities in a new market.

February The Robinson-Patman Act makes "price discrimination" illegal. What does this mean?
A: The law prohibits price discrimination between different purchasers of product of like grade and quality, if this discrimination may substantially injure competition (1) with the person who grants or the person who receives the discriminatory price, or (2) with customers of either of these people." Price differentials are considered to be unlawfully discriminatory only when their effect may be to substantially lessen competition. In other words, a price difference is allowed if it does not substantially reduce competition.

If you are in doubt, discuss it with your corporate council.

January What is the difference between a Key Account, Strategic Account, and a Global Account Manager?
A: It depends upon the person who is answering the question. To most people the terms Strategic Account Management (SAM), Global Account Management (GAM), and Key Account Management (KAM) are interchangeable. They are used to define managers of customer accounts that are of vital importance to the organization, and to which an inordinate share of corporate support resources are allocated.

To people skilled in the application of Key/Strategic/Global Account Management, however, the words take on a distinction. A Key Account is one that is important to the company and may be managed on a nationwide or regional basis. A Strategic Account is similar except it is one that is crucial to the success of the company and it usually receives an enhanced level of attention compared to a Key Account. A Global Account is one that is crucial to the success of the company and is managed worldwide by a senior level manager–there are likely country or regional managers for the account that also report directly or dotted-line to the Global Account Manager. A Global Account Manager, for some larger companies, has his or her own staff of sales and service people for the account.


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