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Customer Focus Through Market Segmentation CORE Metadata, citation and similar papers at core.ac.uk Provided by Göteborgs universitets publikationer - e-publicering och e-arkiv International Business Master Thesis No 2001:43 Customer Focus through Market Segmentation - The Case of Volvo CE and the Recycling/Waste Management Segment Daniel Nilsson and Josef Olsson Graduate Business School School of Economics and Commercial Law Göteborg University ISSN 1403-851X Printed by Novum Grafiska ii "Try not to become a man of success, but rather try to become a man of value." - Albert Einstein iii ABSTRACT Today, companies operating in heavy manufacturing industries experience more complex market situations. Customers are becoming more sophisticated and the competition is increasing. In order to survive, companies must become aware of how value is generated for customers to be able to satisfy their needs. An implementation of a market segmentation approach is a useful tool in becoming more customer focused, as it creates a better ability to identify how value is generated for customers in a segment and adjust its activities in order to provide solutions for their needs. In order to see how value is generated in a segment and how a company can adapt its marketing and sales activities according to that knowledge, we have used Volvo CE and the recycling/waste management segment. To find out how value is generated for customers in this segment, we have used a theoretical framework consisting of customer-perceived value and its influencers organisational buying behaviour and positioning. We have created a framework that can be used by a company in the heavy manufacturing industry to identify how customer-perceived value is generated in a specific segment. This understanding can be used to create segment specific marketing and sales strategies and as a result become customer focused. iv ACKNOWLEDGEMENTS We would like to thank all the people who helped us throughout the writing of this master thesis. Your contributions and insights have been most valuable for us. First of all, we would like to thank Hans Josefsson, Senior Vice President of Market Development at Volvo CE’s headquarters in Brussels, Belgium, who initiated the study and supported us greatly. We would also like to express our gratitude to Lars Ångman at Volvo CE’s headquarters, who has been a great help and support for us. During our trips in Sweden, Belgium and the United Kingdom to conduct visits and interviews, Volvo CE’s representatives have always been very helpful and welcoming. We would especially like to express our gratitude to Pål Torgersen, Director of Corporate Product Planning, for taking such good care of us during the visit in Eskilstuna, Sweden. Finally, we would like to thank our tutors, Hans Jansson and Sten Söderman, for their support and supervision in the process of accomplishing this master thesis. Their experience and knowledge have been invaluable to us. Göteborg, December 2001 Daniel Nilsson Josef Olsson v ABOUT THE AUTHORS Daniel Nilsson was born in 1977 and grew up in Dals-Ed, located in the southwest part of Sweden. In June 2000, he graduated with a Bachelor of Science in Business Administration from Dalarna University, and a part of his degree was taken at Lakehead University in Thunder Bay, Canada. This thesis concludes his studies for a Master of Science in International Business within the Graduate Business School at the School of Economics and Commercial Law, Göteborg University. Josef Olsson was born in 1976 in Simrishamn, Sweden. He grew up in Vårgårda in the southwest of Sweden. He graduated from Halmstad University, Sweden in June 1999 with a Bachelor of Science in Business and Economics. He has also been studying at Pace University in New York. This thesis concludes his studies for a Master of Science in International Business within the Graduate Business School at the School of Economics and Commercial Law, Göteborg University. vi TABLE OF CONTENTS 1 INTRODUCTION...............................................................................................1 1.1 PROBLEM STATEMENT...................................................................................................... 3 1.2 RESEARCH PROBLEMS ...................................................................................................... 3 1.3 PURPOSE........................................................................................................................... 4 1.4 DELIMITATIONS................................................................................................................ 5 1.5 CASE COMPANY ............................................................................................................... 5 2 METHODOLOGY .............................................................................................7 2.1 RESEARCH STRATEGY ...................................................................................................... 7 2.1.1 Choosing a Research Strategy...................................................................................... 8 2.1.2 Generalisation of the Case Study ................................................................................. 8 2.1.3 Selecting the Case to Study .......................................................................................... 9 2.2 RESEARCH APPROACH.................................................................................................... 11 2.3 DATA COLLECTION ........................................................................................................ 11 2.3.1 Secondary Data........................................................................................................... 11 2.3.2 Primary Data............................................................................................................... 12 2.4 QUALITY OF THE RESEARCH........................................................................................... 16 2.4.1 Internal Validity.......................................................................................................... 16 2.4.2 External Validity ........................................................................................................ 18 2.4.3 Reliability ................................................................................................................... 19 2.5 RESEARCH MODEL ......................................................................................................... 21 3 THEORETICAL STUDY ..................................................................................23 3.1 THEORETICAL BACKGROUND ......................................................................................... 24 3.1.1 Industrial Marketing................................................................................................... 24 3.1.2 Market Segmentation ................................................................................................. 27 3.2 THEORETICAL FRAMEWORK........................................................................................... 31 3.2.1 Value .......................................................................................................................... 31 3.2.2 Organisational Buying Behaviour .............................................................................. 36 3.2.3 Positioning.................................................................................................................. 45 3.3 SUMMARY OF THE THEORETICAL FRAMEWORK ............................................................. 49 4 EMPIRICAL EVIDENCE .................................................................................51 4.1 VOLVO CE ..................................................................................................................... 51 4.1.1 Mapping Volvo CE’s Marketing and Sales Activities ............................................... 52 4.2 WASTE MANAGEMENT INDUSTRY.................................................................................. 57 4.2.1 Industry Sensitivity..................................................................................................... 58 4.2.2 Industry Drivers..........................................................................................................58 4.2.3 The European Union................................................................................................... 59 vii 4.2.4 Industry Trends.......................................................................................................... 60 4.3 MAPPING OF VALUE CREATION...................................................................................... 60 4.3.1 Product Factors........................................................................................................... 61 4.3.2 Soft Factors ................................................................................................................ 62 4.3.3 Emotional Factors ...................................................................................................... 63 4.3.4 Price and Total Ownership Costs............................................................................... 64 4.4 MAPPING OF ORGANISATIONAL BUYING BEHAVIOUR.................................................... 65 4.4.1 Industry Actors........................................................................................................... 65 4.4.2 Actors’ Purchase Process ........................................................................................... 66 4.4.3 Purchase
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