HomePublicationsInsightsMARKET SEGMENTATION TO DIFFERENTIATE LOGISTICS SERVICES

MARKET SEGMENTATION TO DIFFERENTIATE LOGISTICS SERVICES

It has been said for several years that the service provided by logistics is one of the great opportunities for companies that wish to differentiate their products/services in the market. Customer service is increasingly valued, both by end consumers and institutional customers, as good products and good prices alone are not enough to meet the requirements of a commercial transaction. This is because, although product and price are essential factors, speed of delivery, product availability, good service, absence of malfunctions, among many other service items, create value by reducing costs for the customer and/or increasing their competitive advantage.

In order to offer a quality service, it is necessary to be able to meet customer expectations. However, such service expectations can vary significantly from customer to customer.

How then to act in the most effective way possible when implementing a service strategy? What service levels to adopt?

The answers to these questions lead to the question of market segmentation. Companies from the most diverse sectors are realizing that acting in a differentiated way, seeking to meet the different needs of different groups of customers, is one of the best policies to be adopted.

Therefore, gaining competitiveness by offering quality services does not mean having to offer high levels of service indiscriminately to all customers. This is because resources may be being spent on groups of customers who do not value such services, which means making the process more onerous, without this being perceived as a differential. Likewise, more demanding customers may not be meeting their service needs. Market segmentation appears, therefore, as a way to increase the effectiveness of the services offered, directing resources appropriately.

Recognizing the importance of segmentation, this article will deal with the segmentation of institutional markets, necessary for the good planning of the service strategy to be adopted by companies.

UNDERSTANDING SEGMENTATION:

To segment means to divide. Market segmentation deals with the subdivision of customers (and potential customers) into distinct groups. Those who belong to the same group must present similar characteristics, so that it is likely that they will present similar purchasing behavior.

There is no single method for market segmentation. Institutional customers can be grouped based on their demographic characteristics (sector of activity to which they belong, size of the company), or by their geographic characteristics, or based on their purchasing behavior (frequency of orders, volume of purchases), among others. However, the various segmentation bases can be separated into two forms that differ in essence.

In the first one, the segments are formed based on easily identifiable characteristics – which are generally available in the companies' registers – such as, for example, the location of customers, or the billing of each one, or the volume of purchases made. In this way, a consumer goods industry, for example, can establish differentiated service policies depending on the size of its retail customer, which can be measured by the number of check-outs or by its billing. It is also possible that the industry prefers to segment the market by the volume of purchases made by commercial companies, thus forming groups that buy large or small quantities. Or else, the separation could be by region, with the levels of service offered differentiated by location. Thus, for example, those retailers located in the Southeast region would be guaranteed delivery in shorter periods, less occurrences of product shortages and delays in delivery than in the Northeast, since more resources would be directed towards improving service levels in that region. .

Therefore, this form of segmentation seeks to identify groups with some common characteristics, assuming that they will also have similar needs and expectations. After the groups are formed, the needs of each one of them can be identified, so that the adoption of service packages can be customized for each segment formed. It is worth noting, however, that the formed segments will not necessarily present different service requirements, considering that the verification of the needs of each group was carried out a posteriori (after the identification of the segment).

The second form, in turn, is characterized by the formation of customer segments that indicate their expectations related to the services to be provided by their suppliers. Therefore, it is clear that, contrary to the first form presented, in this segmentation method it is necessary that first the customer's needs are identified so that, then, those who have service expectations are grouped in the same segment. similar. Consequently, a new segment will only be formed if different needs are really identified, and this is only possible because these needs were verified a priori.

It is known that the first form presented – which mainly includes demographic and geographic segmentation – is the most commonly used by companies, as it is quite simple, intuitive and easy to implement. The second way – called segmentation by benefits by many authors in the marketing area –, although more laborious, is the one whose answer comes closest to the final objective of the segmentation of logistics services, which is to divide the market so that service can be customized in order to meet the different expectations of consumers, effectively directing resources.

In reality, it is unlikely that it will be possible to completely detach the level of service offered from characteristics such as geographic location. And this is not even the best way to act. This is because it may not be operationally viable for a company that has, for example, a factory in Santa Catarina and Distribution Centers in Rio de Janeiro and Pernambuco to make faster deliveries to the North region than to the Southeast region, even though the customers of the most demanding first region.

It is important to realize, however, that despite the existence of some restrictions, the segmentation based on consumer expectations can lead to better planning of the services to be offered. As a consequence, it is possible to generate a greater guarantee that the additional logistical effort, necessary to improve the level of service, is being perceived by the customer as something of value.

HOW TO SEGMENT FROM SERVICE EXPECTATIONS?

In order to be able to use this form of segmentation, it is more than clear the need to know the expectations of the customers. It is worth noting that this is an expectation in the sense of the customer's desire for how suppliers should be acting, and not this customer's prediction of how suppliers will act.

Identifying market expectations is one of the most important steps in the entire process, as this information will be the basis for the analyzes to be carried out later. And in order to obtain this information, it is essential to carry out surveys with customers.

It should be noted that research is necessary, as often what the supplier believes to be the most important attribute for its customer is, in reality, of little relevance, or considered less valuable than other aspects of the service. A high frequency of deliveries, for example, may not be a need for a group of customers, who attach greater value to consistency in delivery times. Emergency deliveries may be considered of little importance to some compared to having adequate information systems in place (see Figure 1).

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To measure service expectation, it is worth remembering that it can be broken down into a series of dimensions. It is possible to find in the literature several attributes to be considered when evaluating services related to logistic processes (see Figure 2). However, it is always necessary that these attributes be adapted to suit the sector to be evaluated, and they must also be complemented with suggestions from survey makers and customers interviewed in a pilot survey.

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After listing the attributes that are part of the service offered, customers should then be interviewed so that they can indicate their expectations in each of the items (see Figure 3). One of the ways to obtain this information is by asking the interviewee to rate the importance of each of the listed attributes. A scale of 1 to 5 can be adopted, for example, where higher scores will indicate that, for that service item, the customer expects better performance from their suppliers.

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Having information about customer expectations available, it is possible to identify segments. The statistical tool of multivariate analysis, cluster analysis, can help in this process. However, even without using this tool, it is often possible to identify large groups. The objective is to group in the same segment those customers who indicated similar importance to the various service attributes, so that different policies can be planned for each group.

Finally, the organizational characteristics of the elements of each defined segment must be analyzed (location, billing, sector of activity, etc). The objective is to find patterns in the formed segments that are not exclusively service expectations, but based on easily identifiable factors, such as demographic variables. This procedure is necessary for the segmentation by expectations to become operationally viable, facilitating the inclusion, in the identified segments, of customers who did not respond to interviews or of new customers that may arise. Discriminant analysis is a statistical tool that can help in this process.

The analysis of the characteristics of the segments will make it possible, for example, to identify which of the segment that values ​​fast deliveries with high frequency are the large retail chains of São Paulo, and which in another segment are the wholesalers of the Northeast. This information will help in the process of planning more targeted service packages.

DIFFICULTIES IN SEGMENTATION:

Errors in the segment decision stage may lead the company to misallocate resources, offering services that are undervalued by the segments and losing the opportunity to gain competitiveness by offering the most valued services. Some of the problems in identifying segments based on expectation can arise due to poorly done field research, errors in data analysis and the lack of operationally viable segments for segmenting services.

However, the main difficulty of market segmentation is not found in the segmentation process itself, but in managing the differentiated customer service policies to be adopted for the identified groups.

It is often necessary to coordinate several segmentation bases, because, for example, the best way of segmenting the merchandising support offered to the stores can be based on the size of the customer, unlike the administration of the delivery system, which can be regional, and the inventory control at the end, which will vary according to demand and by type of customer, and so on. It is also necessary to coordinate the adoption of segmentation policies for the other components of the marketing mix (product, price and promotion) with the segmentation of logistics services, because just as there will be groups of customers who receive differentiated services, not all customers will have access to the same range of products, nor will they pay the same price or receive the same promotions. This all adds to the complexity of segment management.

Another point that should be remembered is related to the need for periodic monitoring of the market. This is because expectations vary over time and can be influenced by several factors such as the economic environment, the performance of competing companies in addition to the performance of the supplier company itself. Changes in expectations will result in the need to adapt the segments and service strategies adopted.

ADDITIONAL CONSIDERATIONS ABOUT SEGMENTATION:

The segmentation of logistics services should not only consider customer expectations. It is necessary to observe the importance of each client for the firm, both in terms of profitability and strategic gains. Lambert (1993) presents an ABC classification method for customers, indicating possibilities for differentiating service levels.

Another issue that cannot be forgotten is related to the increasing use of the Internet in business. Due to its characteristics of high flexibility, the World Wide Web makes it possible to offer highly personalized services, where it is the customer who chooses the package of products, services and prices that meets his requirements. Segmentation in this case can be seen as being done by the user himself, who fits into a segment based on his expectations by selecting the services that are convenient for him.

CONCLUSION

The importance of customer service provided by logistics to obtain competitive advantage is recognized. And market segmentation emerges as an important tool so that the resources to be invested in service are directed in the best possible way.

The perception that not all customers are equally sensitive to service underscores the usefulness of segmentation based on customer expectations, as in this way it will be possible to act to improve service levels that are truly seen as differentials. At the same time, it must be realized that organizational characteristics, mainly demographic ones, need to be taken into account in the segmentation to make it operationally viable.

In order to take advantage of market segmentation, the company needs to structure itself in such a way as to be able to manage the complexity of adopting different service policies for its customers, always being attentive to changes in the market, as these will require readaptations over the course of the year. time.

CONSIDERATIONS ABOUT STATISTICAL ANALYSIS

The most used statistical analyzes in market segmentation are Factor Analysis, Cluster Analysis and Discriminant Analysis, presented below:

Factor analysis:

In studies that evaluate a large number of variables, factor analysis is often used to reduce this number of variables to a smaller set of factors, facilitating data handling and future conclusions.

Thus, for example, in a survey that has measured the importance of the 23 service attributes described in Figure 2, factor analysis can be applied seeking to mathematically answer whether it is possible, for example, to transform the variables Quality of packaging of transport and Packaging Quality for in-store display, which could simply be called Packaging Quality. And perhaps the factor analysis would indicate another factor formed by the variables Regular Phone Calls from Sales Representatives, Quality of Sales Representation, Convenience in Order Fulfillment, Acknowledgment of Order Receipt, which could be interpreted simply as Quality in Order Placement.

The formed factors will be used later as input for carrying out the cluster analysis, which will identify groups with similar expectations.

In general, factor analysis is a good tool when there is a high correlation between the researched variables.

Cluster Analysis:

Cluster analysis is a statistical tool with which it is possible to form groups (clusters) with homogeneity within the cluster and heterogeneity between them. There are different methods for this, which should be selected mainly depending on the amount of data available and the number of segments to be formed.

Customer expectations can be used as input data for group formation.

Discriminant Analysis:

Discriminant analysis is also a multivariate analysis tool. It can help classify (allocation) new elements into predefined groups.

Thus, for example, a customer with a high turnover, with several years of experience in the market and who buys a large quantity of products from a specific supplier each month, can be allocated to the segment that expects high delivery frequencies and short cycle times. .

In general, discriminant analysis is best used when only two groups are predefined.

Computational statistical packages such as SPSS allow performing these multivariate analyses.

https://ilos.com.br

Executive Partner of ILOS, holds a master's degree and a degree in Production Engineering from the Federal University of Rio de Janeiro (UFRJ). With more than 10 years of experience in the field of Logistics and Supply Chain, working on several projects, management and participation in research associated with the subject. She has more than 20 articles in newspapers, magazines, periodicals and congress annals, being co-author of several titles in the COPPEAD Collection by Atlas publishing house and in the Panorama Logístico Collection ILOS and CEL / COPPEAD.

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