Industrial Market Segmentation - Nested Approach To Segmentation (Bonoma & Shapiro Model)

Nested Approach To Segmentation (Bonoma & Shapiro Model)

Taking the Wind & Cardozo model, Bonoma & Shapiro extended this into a multi-step approach in 1984. As the application of all the criteria recommended by Wind and Cardozo and subsequent scholars who expanded upon their two-stage theory became increasingly difficult due to the complexity of modern businesses, Bonoma and Shapiro suggest that the same / similar criteria be applied in multi-process manner to allow flexibility to marketers in selecting or avoiding the criteria as suited to their businesses. “They proposed the use of the following five general segmentation criteria which they arranged in a nested hierarchy:

1. Demographics: industry, company size, customer location
2. Operating variables: company technology, product/brand use status, customer capabilities
3. Purchasing approaches: purchasing function, power structure, buyer-seller relationships, purchasing policies, purchasing criteria
4. Situational factors: urgency of order, product application, size of order
5. Buyers’ personal characteristics: character, approach

The idea was that the marketers would move from the outer nest toward the inner, using as many nests as necessary”. (Kalafatis & Cheston, 1997). As a result this model has become one of the most adapted in the market, rivalling the Wind & Cardozo model head-on. One of the problems with the nested approach “is that there is no clear-cut distinction between purchasing approaches, situational factors and demographics". Bonoma and Shapiro are aware of these overlaps and argue that the nested approach is intended to be used flexibly with a good deal of managerial judgment” (Webster, 2003).