Segmentation of industrial markets is typically based on observable ch
aracteristics of firms such as their location and size. However, such
variables have been found to be poor predictors of industrial buying b
ehavior. To improve the effectiveness and power of existing approaches
to industrial market segmentation, we propose using unobservable char
acteristics such as organizational strategy in addition to the observa
ble characteristics currently used. An important justification for our
approach is that a firms strategy influences its behavior especially
its buying behavior as a result, adding the strategic type and orienta
tion of firms to a segmentation scheme is bound to improve the effecti
veness of the scheme. To test the effectiveness of our approach, we co
nducted an empirical study of the pur-chase of car phones by 200 Dutch
firms. The results support our predictions. In fact, they indicate th
at a firm's strategy is art even more important determinant of industr
ial buying behavior than the variables currently used. Thus, strategy-
based segmentation may be a more powerful and effective approach to in
dustrial segmentation than current approaches. (C) 1998 Elsevier Scien
ce Inc.