1. Sara Lee Corporation derives more than $1.5 billion of sales each year from the institutional
market (for example, hospitals, schools, and restaurants). Explain how a firm such as Sara Lee or
General Mills might apply the concept of market segmentation to the institutional market.
A market segment according to the book is a group of present or potential customers with some
common characteristics, which is relevant in explaining their response to a supplier marketing
incentives. Marketing segmentation begins at the Macro Level. Macro-segmentation centers on
characteristics of the buying organization and the buying situation. This divides the market by
organizational size, geographic location, North American Industrial Classification (NAICS), and
organizational category. Micro-segmentation is in contrast to macro-segmentation and requires a
higher degree of market knowledge. The focus is in characteristics of decision-making units within
each macrosegment. This includes but not limited to buying decision criteria, perceived importance
of the purchase, and attitudes towards the vendor. When conducting market segmentations experts
suggest a twostep approach of identifying meaningful macro-segments and the divide the macro-
segments into micro-segments.
To start with, a macro-segmentation Sara Lee could start at the macro level characteristics of
the buying organizations. One could assume that some of their hospital clients could be segmented
into different sizes such as large hospitals, medium hospitals, and smaller hospitals. The same macro
level approach then would be used for schools, and restaurants. Then the marketer could divide the
market basis of specific end- use applications of the industry. NACIS system are especially valuable
for this purpose. The system can isolate specialized user needs of each user group by using a NACIS
system. This would allow a company like Sara Lee to be better equipped and differentiae customer
requirements and to evaluate emerging opportunities. The value is use approach is a products
economic value to the user relative to a specific alternative in a particular application. In Sara Lee
situation it could use computerize routing that allows them to deliver products more efficiently
making them better than their competitors. Finally, purchasing situation is classifying buyers based
on where they are at in the procurement process. For example new-task, rebuy, or modify rebuy.
The position of the firm in procurement decision process dictates the marketing strategy. So for