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Market Segmentation - Basics PDF Print E-mail
Market segmentation is one of the widest spread practices in marketing; a very familiar concept, still generating a lot of debate.
As most of the concepts in marketing, it does not have a unique definition.
We would define market segmentation as a systematic process of identifying homogenous groups of customers that react differently to marketing mix element.
 

Characteristics

A good segmentation should be filtered through the following check-list:

Segments should be distinctive (not overlaid – meaning one customer should belong to one segment)
Segments should be large enough to be worth treating them distinctively
Segments should be identifiable
Segments should react differently to different combinations or levels of marketing mix elements
Segments should have some sense of stability in time

There are different variations around the above points, but generally speaking these bullets are to be met by most segmentation approaches, at least the major strategic ones
 

Platforms

Demographic segmentation – often perceived as obsolete, it still exists and, to some extent, it brings value. Companies should know how they are perceived by different age groups. Age does discriminate in many areas and is a good link to profiles received from different partners (media, for instance). Gender may work. Occupation as well…Income for sure, especially for some particular offers in the market (products or services)

Geographic segmentation: from a basic urban/rural split, to more detailed regional divisions, geographical perspective on the market brings value in many areas. Some markets are strongly discriminated by population layout in the territory.

Soft (research) segmentations: we have included here multiple approaches, like attitudinal, motivational, need-based, life-style, etc. Fundamentally, they are different at the core, but they all derive from research, from samples of consumers being asked questions.

Behavioral segmentations; based on existing internal data, for companies in industries that own strong customer data (telecom, banking, retail chains, etc)

 

The purpose of the segmentation is to optimize resource allocation. In brief, through better understanding your market, having in-depth knowledge on homogenous groups of customers, you can target them in a better way – in terms of products, prices, communication or distribution. This translates in being closer to them, increase relevance and improve efficiency of any euro or dollar spent in a marketing initiative.
 

Measuring the impact of segmentation within organizations is still an issue and many companies could hardly achieve this. However, it is quite common understanding that a proper, consistent segmentation is a tremendous tool in marketing strategy and management.

 

quantix marketing consulting 2009
 
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