market segmentation


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Market Segmentation

In marketing, a strategy that divides potential customers into different groups that are likely to respond to a certain marketing tactic. For example, given a product that would appeal to both young people and older people, a market segmentation strategy would divide tactics between the two age groups. That is, it might produce commercials on daytime television for the older people and viral internet advertisements for the younger people.
Market segmentationclick for a larger image
Fig. 56 Market segmentation. A matrix for paint.

market segmentation

the division of a MARKET into identifiable submarkets or segments each having its own particular customer profile and BUYER characteristics. A market can often be divided up broadly into major customer segments as well as more narrowly into various submarkets within each of these segments. In MARKETING terms, markets can be segmented in a number of ways as Fig. 56 (overleaf) indicates, pyramiding down from the identification of major subgroups of customers, and their particular product-type requirements and preferences with reference to such things as range of quality gradations, colouring and packaging. Further elements in market segmentation include the distribution outlets used by buyers to make purchases and the geographical boundaries of the market.

Depending upon the complexity of a market as revealed by market segment analysis, a firm may choose to operate ‘across the board’ or decide to focus on a limited number of segments. Since most markets in practice possess segmentation characteristics to a greater or lesser degree, an UNDIFFERENTIATED MARKETING STRATEGY involving a uniform MARKETING MIX approach across all segments is likely to be of only limited effectiveness. A more attractive approach in these circumstances is a DIFFERENTIATED MARKETING OR TARGETING STRATEGY involving various ‘customized’ marketing mix formulations, each tailored to match the buyer characteristics of the segments targeted. A third approach, a CONCENTRATED MARKETING OR TARGETING STRATEGY, may be applied where the firm decides to target the whole of its marketing effort on one particular segment. See VALUE ADDED MODEL, CONSUMER SURPLUS, SOCIOECONOMIC GROUP, CONSUMER SEGMENTATION, DISTRIBUTION CHANNEL, PRODUCT RANGE, PRODUCT ATTRIBUTES, PACKAGING, INTERNATIONAL MARKETING, BRAND EXTENSION, PRODUCT POSITIONING, CUSTOMIZATION.

market segmentation

the division of a MARKET into particular subgroups of customers, each with its own buying characteristics, for example, men and women. Firms are thus able to adopt PRODUCT DIFFERENTIATION strategies to cater for the needs of different groups of buyers, enlarging their sales potential. See alsoPRICE DISCRIMINATION, PRODUCT PROLIFERATION.
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