ABSTRACT
Segmentation matters – especially when firms face the challenge of intense competition and eroding profitability brought on by declining prices. Consider the case of Dow Corning (Gary 2004). As a perennial leader in the silicone market, they admittedly had become complacent in the face of aggressive competitors who were offering lower prices. They also faced increasing costs for innovation and service. To cope with these challenges they employed market segmentation to better understand the structure of their market. In their segmentation of the market, they learned that not all customers had the same set of needs. Some required more service than others, some valued innovation more than others, while others were trying to improve the profitability of their own businesses. They also learned that one segment no longer needed the added value of service, innovation, or a broad product assortment of the silicone products they purchased; instead they just wanted the best price.
