MKTR

ABB Electric Segmentation

1. On a general scale, customers in District 2 seem to have the highest average purchase
volume of $1676k (See Exhibit 1). Hence, we have looked at the potential targets (both
customers and non-customers) in District 2 that ABB could direct its marketing program at.
Current Customers
Out of its current customers, ABB could concentrate on relatively low spending customers
(<$500k). These are essentially the bottom seven customers (13-38) out of ABBs current
base of 18. See Exhibit 2 for the list of ABBs current customers.
Non-Customers
ABB should concentrate on customers in District 2 that are currently customers of other
companies as this represents a major share of the market enjoyed by its competitors.
ABB should also target customer 43 ($12,514k) and Customer 35 (14,798k) as these are
targets that would add a lot of value to ABB.
In addition, there are a lot of high- value customers in Districts 1 and 3 that would greatly
increase the sales of ABB. Exhibit 3 provides a non-exhaustive list of these customers.

2. Based on the Exhibit 4, the key drivers of choice (in order of ranking) in this market are:
i.
Energy Loss
ii.
Quality
iii.
Price
iv.
Problem Solver
v.
Warranty
vi.
Ease of Install
Based on our analyses, the customers whom ABB should focus its efforts on are GE and
Westinghouse. This is because improvements in ABBs drivers has the greatest impact on
these companies. Exhibit 5 highlights elasticities of the top 5 key drivers.
3. Two approaches were used to define the competitive and switchable groups. In the first
approach Predicted and Observed choices were involved (from the Estimation tab). The
customers who were Predicted as ABB but ended up choosing a competitor and the
customers who chose ABB even when they were not Predicted ABB customers were
concentrated on. An estimation of probability based selection was chosen as the second
approach. The bracket of probabilities was chosen assuming that customers with above
70% and below 30% probability of choosing ABB would fall into the Loyal and Lost
categories respectively.

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On the Descriptor Data tab, the values of the annual purchases for the customers identified
using these approaches were added. Since only half of these could be won or retained, the
value obtained was halved. It is observed that the improvement in sales productivity by this
choice model would be to the tune of $51000. See Exhibit 6.
4. The first thing that ABB Electric should look at is preventing its Loyal segment from being
poached. Estimation Sample Details tab would fetch relevant data to characterize the
customers in this segment.
Again, using the probabilities to segregate these customers and focusing on influencing
their repurchase decisions would be a fruitful exercise for ABB Electric. This would ensure
that the loyal customers end up becoming lifetime customers for ABBs products.
Another segment worth looking at would be the Competitive customers who have a slightly
higher probability of buying from ABB than from the next competitor. It would be difficult
to woo back these customers once they have departed to the Switchable or Lost
categories. Due efforts to improve retention in this segment would fittingly increase
profitability.
5. ABB could look at maintaining customer data and then look at historical patterns while
making sales and marketing decisions. Concerning uses and limitations, addition of fields
that indicate customer loyalty could be included to reduce limitations. To eliminate another
limitation, data indicating how businesses make decisions could be included. Building
associations with specific departments making these decisions would help push sales. This
would also strengthen and retain the competitive edge that ABB has now established.
The case states that the salesforce was not well focused and did what it thought was
required at that moment. The salesforce needs a structured working approach for which
they could determine what they want to compete on in the market, viz., price or quality and
focus to improve the product on those attributes. Also, the company could look at focusing
its marketing efforts on a particular product instead.

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Exhibit 1
No. of
Total Purchase Average
District Customer
Volume ($ k)
($ k)
1
31
23359
754
2
32
53639
1676
3
25
25761
1030

Exhibit 2

Exhibit 3

44
11
37
42
21
57
58
54
3
50
69
13
61
41
45
87
24
38

Customer
44
11
37
42
21
57
58
54
3
50
69
13
61
41
45
87
24
38

35
43
66
32
84
17
74
20
53
47
12
26
16
33
23
27
28
10
40
25

Customer
35
43
66
32
84
17
74
20
53
47
12
26
16
33
23
27
28
10
40
25

Ann. Purchase
Volume ($ K)
$10,997
$1,722
$767
$752
$749
$736
$700
$660
$643
$584
$528
$466
$462
$444
$415
$395
$322
$182
Ann. Purchase
Volume ($ K)
$14,798
$12,514
$9,793
$6,270
$1,404
$1,364
$1,219
$1,009
$989
$956
$928
$899
$894
$890
$871
$871
$855
$844
$808
$800

District
2
3
2
1
3
1
3
1
2
3
1
2
3
1
1
2
1
2

District
2
2
3
1
3
3
1
2
2
2
1
2
3
3
2
1
3
1
1
2

Firm
Chosen
D
C
B
C
B
B
B
B
C
B
D
D
B
D
D
D
D
B
C
C

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Exhibit 4 (Coefficient estimates segments)

Variables / Coefficient
estimates
Price
Energy Loss
Maintenance
Warranty
Spare Parts
Ease of Install
Prob Solver
Quality
Const-1
Const-2
Const-3
Baseline

Coefficie
Standard
nt
t-statistic
deviation
estimates
2.180581
2.655609
0.593692
1.140702
-0.13262
0.520023
2.03218
2.639412
-0.12379
-0.67122
-0.68723

0.586578
0.673706
0.437028
0.330995
0.21757
0.172875
0.549676
0.687749
0.678549
0.71941
0.715046
n/a

3.717459
3.941794
1.358475
3.446286
-0.60955
3.00808
3.697052
3.837753
-0.18244
-0.93301
-0.96111
n/a

Exhibit 5

ABB
Elasticities of Energy
Loss
Elasticities of Quality
Elasticities of Price
Elasticities of Prob
Solver
Elasticities of Warranty

Westinghouse

Edison

4.6438

-1.5169

-1.2878

-0.7246

4.3174
3.6346

-1.2843
-1.1613

-1.3057
-1.0230

-0.6774
-0.5769

4.0980

-1.2990

-1.1807

-0.6281

2.0730

-0.6746

-0.6010

-0.2940

Exhibit 6
Customers
Customer 4
Customer 16
Customer 84
Customer 86
Customer 11
Customer 37
Customer 41
Customer 50
Customer 61
Customer 7
Customer 13
Customer 26
Customer 36
Total
50% of Total

GE

Ann. Volume
($ K)

$562
$894
$1,404
$480
$1,722
$767
$444
$584
$462
$664
$466
$899
$511
$102,759
$51,380

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