• Market segmentation is the process of dividing a larger market into smaller groups of consumers with similar needs or characteristics.
  • Often market segmentation is done based on several criteria such as age, sex, behaviour etc
  • Market segmentation is a crucial step in the marketing process as it helps businesses identify specific customer groups to target with marketing efforts.
  • By understanding the unique needs and preferences of these groups, businesses can develop more effective marketing strategies and improve customer satisfaction and loyalty.
  • As already pointed out above market segmentation is part of the marketing process

The common basis of market segmentation:

  • Demographic: Dividing the market based on age, gender, income, education, and other demographic factors. Example: A toy company may target parents with young children aged 2-5 years old.
  • Geographic: Dividing the market based on geographic location. Example: A beachwear company may target customers living in coastal areas or warm climates.
  • Psychographic: Dividing the market based on values, attitudes, and lifestyles. Example: A health food company may target customers who value organic, non-GMO, and sustainable products.
  • Behavioural: Dividing the market based on customer behaviour, such as purchasing habits, brand loyalty, and product usage. Example: A pet food company may target customers who frequently purchase premium pet food brands.

How market segmentation is done

  1. Surveys and questionnaires: Collecting data directly from customers to understand their needs and preferences.
  2. Customer behavior analysis: Examining customer purchase history and behaviour to identify patterns and preferences.
  3. Market research: Conducting research on industry trends, consumer behaviour, and competitor analysis.

Advantages of segmentation:

  • Targeted marketing: Businesses can develop more effective marketing strategies by targeting specific customer groups with tailored messages and offers.
  • Increased customer satisfaction: By understanding the unique needs and preferences of customer segments, businesses can develop products and services that better meet their needs, leading to higher customer satisfaction and loyalty.
  • Competitive advantage: By identifying niche markets and developing targeted marketing strategies, businesses can gain a competitive advantage over rivals.

Disadvantages of segmentation:

  • Increased marketing costs: Developing targeted marketing strategies for multiple customer segments can be costly and time-consuming.
  • Oversimplification: Dividing the market into segments can oversimplify customer needs and preferences, leading to less effective marketing strategies.
  • Segmentation overlap: There may be an overlap between customer segments, making it difficult to develop tailored marketing strategies for each group.

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