An Introduction To Market Segmentation

Introduction

Market segmentation refers to the division of a market into different segments. Customers in each of these segments have similar requirements. Market segmentation is done based on various determining factors such as age, location, behavior, lifestyle and occasions. This strategy helps in minimizing the risks related to the marketing of products.

How to segment a target market

Before knowing the different strategies and methods used for market segmentation, it is important to have an understanding of the criteria that makes a good market segment. A good market segment is measurable and large enough to earn profit. It has stability and reaches potential customers using the channels of promotion pertinent to the organization. Prospective customers in the same segment have similar preferences while those in different ones have different quality preferences.

Market segmentation can be of various types depending on the factor that is being considered.

Geographic Segmentation: This type of segmentation is done based on the geographical location of the target customers. For example, hilly regions are ideal for selling woolen garments and winter accessories.

Demographic Segmentation: This refers to segmentation of customers based on factors such as age, gender, occupation, religion and race to name a few.

Behavioral Segmentation: This type of segmentation is based on general behavior of the customers in relation to the product. This includes their knowledge of the product, attitude towards it and their usage rate.

Lifestyle Segmentation: In this type of segmentation, the various aspects of how the prospective customers lead their lives are taken into consideration such as their activities, interests and opinions. These factors are likely to influence the kind of products they may purchase.

Segmentation by occasion: Customers may certain requirements that may be specific to a particular occasion such as festivals or important personal events. Examples of such requirements may be decoration stuff for Christmas or bridal wear for a wedding.

There are two main types of segmentation strategies used by organizations.

Concentration Strategy: This strategy of market segmentation implies marketing focused on a single market segment. A good example of the concentration strategy can be marketing of luxury cars as only high net-worth individuals can buy them.

Multi-segment Strategy: In this strategy, the marketing efforts are focused on two or more different market segments. This method applies to products which are used by different categories of customers.

Why is segmentation important?

There are two main reasons why market segmentation is such an important part of an organization’s marketing strategy.

• It minimizes the risk in marketing a product by identifying prospective customers with similar buying habits.
• It maximizes the efficiency of marketing by focusing on a specific segment in a way that is in line with its characteristics.

Conclusion

Market segmentation is integral to a firm’s marketing strategy. At the same time, it helps in manufacturing products in line with customer preferences.