• Market refers to a group of people with sufficient purchasing power, authority and willingness to buy.
• Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers, who have common needs and priorities, and then designing and implementing strategies to target them.
• Market segmentation strategies may be used to identify the target customers, and provide supporting data for positioning to achieve a marketing plan objective.
An ideal market segment meets all of the following criteria:
• It is possible to measure.
• It must be large enough to earn profit.
• It must be stable enough that it does not vanish after some time.
• It is possible to reach potential customers via the organization's promotion and distribution channel.
• It is internally homogeneous (potential customers in the same segment prefer the same product qualities).
• It is externally heterogeneous (potential customers from different segments have different quality preferences).
• It responds consistently to a given market stimulus.
• It can be reached by market intervention in a cost-effective manner.
• It is useful in deciding on the marketing mix.
• It identifies the target customer(s) (surrogate(s))
• It provides supporting data for a market positioning or sales approach.
Four common bases for segmenting consumer needs are:
• Geographic segmentation:
It is the division of an overall market into homogeneous groups based on their locations.
• Demographic segmentation
It is the division of an overall market into homogeneous groups based on variables such as gender, age, income, household size, etc.
• Psychographic segmentation
It is the division of a population into groups that have similar psychological characteristics, values and life cycles.
• Product-related segmentation
• It is the division of a population into homogeneous groups based on their relationships to the product.