It is helpful when there is no significant difference between operating variables, purchasing approach, situational factors and personal characteristics of customers.
Geodemographic segmentation is a logical starting point because However, Webster (2005) believed that this approach misses a set of essential variables.
J. Frederick described five factors that should be considered when defining a component market: industry, product use, company buying habits, channels of distribution, and geographic location.
Yoram Wind and Richard Cardozo in 1974 advocate a two-stage approach to industrial segmentation that consists of macrosegments and microsegments.
More typical, however, is that a two-stage approach that will employ benefits and organizational psychographics and purchasing criteria will be needed to provide complete market profiles.
The set of segmentation bases captures from macro-level to micro-level, and firmographics belong to the macro approach and comprise from industry, company size, customer location.
[3] It is not recommended to base segmentation solely on emporographics in the long term unless they reflect clear differences in needs, benefits, and product use.
This is because the increasing competitive pressures observable in most organizational markets will, sooner or later, erode any industry structures not based on customer needs.
Curran and Goodfellow suggest that descriptor-based approaches are popular, because they are convenient, clear cut, easy to implement, and they result in boundaries that are relatively stable over time.
The attraction of descriptor-based or firmographic approaches is understandable in the circumstances and can provide useful and important insights to the practical issues of engaging with customers.
But these approaches provide little understanding of underlying customer needs and so do not constitute a sufficient basis for segmentation in unfamiliar or competitively challenging markets.
As a segmentation variable, firms may be aggregated by city, metropolitan statistical area, state, region, country, or continent.
Most business activities are naturally constrained to certain regions due to competitive pressures, legal restrictions, and cost constraints.