Companies that sell soap, perfume, candy bars, and other consumer

Companies that sell soap, perfume, candy bars, and other consumer products are expert at “decommoditizing” them: finding and capturing the value of intangible benefits as well as building strong brand identification. But companies that sell unspecialized products such as bulk chemicals, paper, and steel to businesses tend to be unsophisticated in these matters. Many of these companies strive to churn out more product more cheaply and then to sell as much as possible at the market price. Viewing themselves as commodity producers, they are inclined to overlook the nonfunctional features of their products—delivery speeds, after-sales service, etc.

As a result, such companies leave large amounts of money on the table. They would be far better off if they looked to marketing-oriented businesses and embraced the notion that buyers care not only about a product’s price but also about the way it is sold to them, the services that accompany it, and the relationship with the seller. If these manufacturers were to take that approach, they would find themselves thinking about their customer base not as they have traditionally segmented it—large and small, based in France or Germany, and so forth—but as composed of businesses that want (and are willing to pay for) quite different things. This would in turn help manufacturers focus on the segments whose business they can win and retain most profitably.
1. According to the passage, companies that sell bulk chemicals, paper, and steel tend to fail to view their customer base as being segmented in which of the following ways?

Let us check the options

A. According to the size of the businesses in each segment
This is the way it was traditionally segmented. Blue portion

B. According to the buying power of the businesses in each segment
There is no mention of buying power.

C. According to the common wants of the businesses in each segment
The bold portion in the para speaks of the different things the businesses want. So, the segment should be done as per their common wants.
Correct

D. According to the length of their relationship with the businesses in each segment
The red portion may tempt one towards this answer. But these portions just talk of services and relations that buyer wants with the seller. It no where suggests that the segments have to be divided as per the length of relationship, for example those working together for 10 years different from those working for 20 years. Also, the portion of para speaking about these segments is only after the blue portion.

E. According to the regional characteristics of the businesses in each segment
Again, traditional segments, blue portion.

C

 

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There's nothing in the passage about segmenting based on length, so (D) has to go.

As stated in previous replies, the author suggests that companies that sell unspecialized products SHOULD think about their customer base as composed of businesses that want quite different things. In other words, they SHOULD think about their customer base as being segmented based on what the customers want (e.g. Segment A wants super fast delivery speeds, Segment B wants really good after-sales service, etc.).

In that case, a segment would consist of businesses that have certain "wants" in common -- and since the companies aren't currently segmenting that way, (C) is spot on.

I hope that helps!­­­­­