Market Segmentation

Description of Market Segmentation. Explanation.

Definition 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

Geographic Segmentation.
Demographic Segmentation (age, gender, income occupation etc). Compare: JICNARS Scale
Psychographics Segmentation (values, attitudes, social class, lifestyle and aspirations). Compare: Values and Lifestyles
Behavioral Segmentation (occasion, benefits sought, loyalty status, user status, buyer readiness).
Product differences.

Steps in segmentation. Process

Identify the total market.
Determine the segmenting dimensions.
Profile each segment.
Assess segment attractiveness.
Select target market.
Determine positioning (marketing mix) for each segment.

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 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 -

Market Segmentation Forum (12)

Ideas for Demand Segmentation based on the Total Need for a Product
"Traditionally, marketers have been interested in cracking demand by making more sales using tools like increased sales force, increased visibility and by direct marketing tools. These have been instrumental in increasing the bottom lines of most of the organizations.
A backward integration of the same demand would arise into need generation.
A simple difference between the need and the demand for a product or service is that demand would be backed by the ability to buy, whereas need would only take care of the willingness to buy the product or service.
For example, a beggar dreaming for air travel can be considered as a case of need: though he dreams of it (Willingness), he doesn't have the money (Ability) to pay for it. In such cases of need, marketers are not interested.
Now comes the case of a businessman aspiring for air travel. He posesses both mentioned ingredients, Ability as well Willingness. And marketers are interested here since that creates demand. Cracking demand as per your wish is the job of marketing people.
Now the question is, can you crack demand also from the point of need generation? Can we segment the total available demand in a given market?"

Forward and Backward Segmentation
"When you have selected the data, segments should be deduced. Two types or approaches of segmentation exist:
1. Forward Segmentation (also called A Priori Segmentation): customers are first classified on personal characteristics. Then differences between groups in terms of product and (brand)characteristics are examined.
2. Backward Segmentation: starts with groups of customers that have different behaviour in relation to the product or brand for example by wanting different benefits. Then the general (personal) characteristics that can be used to describe each group are examined."

Conditions for a Segment
"A group of potential buyers or customers can be called a "segment" if the following four conditions are met:
1. Homogeneity; in a segment the response to an activity should be as homogeneous as possible, and between segments it should be as heterogeneous as possible.
2. Size; segments must be big enough to allow profitable exploitation.
3. Identifiable (Measurable); the customers in the segments should be identified. Without identification it's difficult to know the exact size of the segment.
4. Accessible; if you want to use the marketing mix or other features, the segment has to be accessible.
Only quantitative research can provide insight to these four points."

Market Segmentation and Target Marketing
"The concepts of market segmentation and target marketing, are they the same?"

Segmentation Examples
"I need 2 examples of segmentation process for psychographic and behavioral in retail consumer products goods
Thanks."

Is Segmentation of Taxpayers Possible?
"How successfully could segmentation be applied to servicing taxpayers treated as customers of the government. What could be the negatives and futility of such an approach and what could be the possible upsides?"

Disadvantages of Demographic Segmentation
"I need to know the drawbacks of demographic segmentation. Thanks"

Segmentation Requirements
"Market segmentation requires accurate and reliable info, and a triangulation of the major environmental factors."

Market Segmenting Process
"This article discusses and explains the various steps in the market segmentation process and criteria used in determining and selecting competitive segments."

Segmentation and Marketing Mix
"Segmentation and the Marketing Mix are interrelated because one can know by segmenting targeted customers into individual groups how to come up with a product that best suits the needs of each group, can determine the best pricing strategy based on the individual group needs, where to best distribute and make available the product for each individual group, and how to best promote the product to appeal to each group."