Market Segmentation

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Description of Market Segmentation. Explanation.

 

Market SegmentsDefinition Market Segmentation. Description.

Market Segmentation is the marketing process of identifying and breaking up the total market into groups of potential customers with similar motivations, needs, characteristics or behavior, who are likely to exhibit homogeneous purchase behavior.


Undertaking this process allows marketing efforts to be targeted at select groups. In determining their segmentation strategy, organizations can choose to pursue the whole market with a single offer (Undifferentiated Marketing), pursue only certain segments with specific offers (Niche Marketing) or pursue individual customers with specific offers designed just for them (Customization).


The process enables a company to develop a suitable Marketing Mix for each of the chosen market segments.

A Market Segment is a (relatively) homogeneous group of customers with similar characteristics, wants, needs or behaviors which is likely to respond similarly to a given marketing mix.
 

5 Ways or bases of market segmentation

  1. Geographic Segmentation (continents, countries, nations, states, regions, counties, or cities).

  2. Demographic Segmentation (age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation, etc). Compare: JICNARS Scale

  3. Psychographics Segmentation (values, attitudes, social class, lifestyle, personality characteristics, aspirations). Compare: Values and Lifestyles

  4. Behavioral Segmentation (consumer knowledge, attitudes, uses, or responses to a product, occasion, benefits sought, loyalty status, user status, buyer readiness).

  5. Product differences.

Steps in segmentation. Process

  1. Identify the total market.

  2. Determine the segmenting dimensions.

  3. Profile each segment.

  4. Assess segment attractiveness.

  5. Select target market.

  6. Determine positioning (marketing mix) for each segment.

Segmentation Requirements



To be useful, market segments must be:

  • Measurable
  • Accessible
  • Substantial
  • Differentiable
  • Actionable

Strengths of Segmentation. Benefits

  • Organization get to know its customers better.

  • Provides guidelines for resource allocation.

  • It helps focus the strategy of the organization.

Limitations of Segmentation. Disadvantages

  • Targeting multiple segments increases marketing costs.

  • Segmentation can lead to proliferation of products.

  • Narrowly segmenting a market can hamper the development of more broad brand equity.

Book: Dowling, G. - The art and science of marketing; Marketing for marketing managers -

Book: Kotler, P., Brown, L., Adams, S. & Armstrong, G. - Marketing, 6th edition -

Book: Simpson, P.M. - Marketing segmentation and target markets; Marketing best practices; 2nd edition -


Special Interest Group - Market Segmentation


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Compare with: 3 C's (Ohmae)  |  Multi Channel Marketing  |  Target Marketing  |  Positioning  |  Marketing Mix  |  Extended Marketing Mix (7-Ps)  |  4S Web Marketing Mix  |  Competitive Environment  |  Competitive Intelligence  |  Competitive Position  |  Values and Lifestyles  |  Profit Pools  |  SOSTAC

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