Exploring unanticipated consequences of strategy amongst stakeholder segments: the case of a European Revenue Service

This article applies FIMIX-PLS segmentation methodology to detect and explore unanticipated reactions to organisational strategy among stakeholder segments. For many large organisations today, the tendency to apply a “one-size-fits-all” strategy to members of a stakeholder population, commonly driven by a desire for simplicity, efficiency and fairness, may actually result in unanticipated consequences amongst specific subgroups within the target population. This study argues that it is critical for organisations to understand the varying and potentially harmful effects of strategic actions across differing, and previously unidentified, segments within a stakeholder population. The case of a European revenue service that currently focuses its strategic actions on building trust and compliant behaviour amongst taxpayers is used as the context for this study. FIMIX-PLS analysis is applied to a sample of 501 individual taxpayers, while a novel PLS-based approach for assessing measurement model invariance that can be applied to both reflective and formative measures is also introduced for the purpose of multi-group comparisons. The findings suggest that individual taxpayers can be split into two equal-sized segments with highly differentiated characteristics and reactions to organisational strategy and communications. Compliant behaviour in the first segment (n = 223), labelled “relationships centred on trust,” is mainly driven through positive service experiences and judgements of competence, while judgements of benevolence lead to the unanticipated reaction of increasing distrust among this group. Conversely, compliant behaviour in the second segment (n = 278), labelled “relationships centred on distrust,” is driven by the reduction of fear and scepticism towards the revenue service, which is achieved through signalling benevolence, reduced enforcement and the lower incidence of negative stories. In this segment, the use of enforcement has the unanticipated and counterproductive effect of ultimately reducing compliant behaviour.

Bridging the segmentation theory/practice divide

More than thirty years ago, Wind's seminal review of research in market segmentation culminated with a research agenda for the subject area. In the intervening period, research has focused on the development of segmentation bases and models, segmentation research techniques and the identification of statistically sound solutions. Practical questions about implementation and the integration of segmentation into marketing strategy have received less attention, even though practitioners are known to struggle with the actual practice of segmentation. This special issue is motivated by this tension between theory and practice, which has shaped and continues to influence the research priorities for the field. Although many years may have elapsed since Wind's original research agenda, pressing questions about effectiveness and productivity apparently remain; namely: (i) concerns about the link between segmentation and performance, and its measurement; and (ii) the notion that productivity improvements arising from segmentation are only achievable if the segmentation process is effectively implemented. There were central themes to the call for papers for this special issue, which aims to develop our understanding of segmentation value, productivity and strategies, and managerial issues and implementation.

Achieving market segmentation from B2B sectorisation

Purpose – The creation of a target market strategy is integral to developing an effective business strategy. The concept of market segmentation is often cited as pivotal to establishing a target market strategy, yet all too often business-to-business marketers utilise little more than trade sectors or product groups as the basis for their groupings of customers, rather than customers' characteristics and buying behaviour. The purpose of this paper is to offer a solution for managers, focusing on customer purchasing behaviour, which evolves from the organisation's existing criteria used for grouping its customers. Design/methodology/approach – One of the underlying reasons managers fail to embrace best practice market segmentation is their inability to manage the transition from how target markets in an organisation are currently described to how they might look when based on customer characteristics, needs, purchasing behaviour and decision-making. Any attempt to develop market segments should reflect the inability of organisations to ignore their existing customer group classification schemes and associated customer-facing operational practices, such as distribution channels and sales force allocations. Findings – A straightforward process has been derived and applied, enabling organisations to practice market segmentation in an evolutionary manner, facilitating the transition to customer-led target market segments. This process also ensures commitment from the managers responsible for implementing the eventual segmentation scheme. This paper outlines the six stages of this process and presents an illustrative example from the agrichemicals sector, supported by other cases. Research implications – The process presented in this paper for embarking on market segmentation focuses on customer purchasing behaviour rather than business sectors or product group classifications - which is true to the concept of market segmentation - but in a manner that participating managers find non-threatening. The resulting market segments have their basis in the organisation's existing customer classification schemes and are an iteration to which most managers readily buy-in. Originality/value – Despite the size of the market segmentation literature, very few papers offer step-by-step guidance for developing customer-focused market segments in business-to-business marketing. The analytical tool for assessing customer purchasing deployed in this paper originally was created to assist in marketing planning programmes, but has since proved its worth as the foundation for creating segmentation schemes in business marketing, as described in this paper.