Segmentation is an important part of the strategic marketing process. The enterprise must first identify a market, and then divide it into ‘segments’. A segment is a group of buyers selected from the market based on similar needs, expected benefits, purchasing habits and occasions that an enterprise hopes it can meet better than its competitors or that it believes no one has met.


Types of Segmentation

  • Demographic Segmentation - Localizes its marketing efforts to specific geographic regions
  • Need Based Segmentation - Markets can be segmented based on the benefits that consumers desire from using a specific product
  • Geographic Segmentation – Based on the geographical parameters like region, country, state, city etc.
  • Psychographic Segmentation - Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions)
  • Behavior/Usage Segmentation - Markets can be segmented by how often or how heavily consumers use a specific product


Criteria for effective segmentation

A good and practical segmentation would have segments with similar characteristics within each segment but can be easily differentiated from other segment. Each segment should be

  • Distinctive - Clear differences in consumer preferences for a product must exist. For example car manufacturer (manufacturing all types of cars) may want to segment its market into three classes based on the income level of consumers. First could be consumers earning less than Rs.10 lakhs p.a. who’s preference would be a car which provides value for money (mileage, etc.). The second segment could be of consumers with income ranging between Rs.10-20 lakhs p.a. that would prefer to buy a car which provides reasonable balance between economy and comfort (power steering, space, top speed etc.). The third segment could be of customers with income above 20 lakhs that prefer cars which provide luxurious comfort (automatic transmission, power, champagne cooler, etc). Need based approach has been used to segment the market.
  • Measurable – Different preferences for a product must be identifiable and capable of being related to measurable variables. Taking the earlier example, all the features of a car (mileage, power steering automatic transmission etc) taken into consideration for segmenting is easily identifiable and measurable.
  • Substantial - The proposed market segment must have enough size and purchasing power to be profitable. The market segments for the car manufacturer based on income are <10 lakhs, 10-20, >20 lakhs. Based on the consumer preference (value for money, reasonable balance between economy and comfort, and luxurious comfort) the manufacturer can target specific segment for specific car models.
  • Actionable - Companies must be able to respond to difference in preferences with an appropriate marketing mix. The three preferences which are distinctive can be easily targeted with appropriate marketing mix.
  • Accessible - The proposed market segment must be readily accessible and reachable with market programs.


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