MARKET SEGMENTATION

Consumers are not part of a homogenous group. Buyers have different needs and desires. So, for companies, market segmentation is crucial. It defines competitors and Industry.

It helps you to understand and define your business. Once you do that, you have a clear picture of your customers and competitors. More important, it determines what you do – your strategy.

Critics would say that there is no right way to identify or define your industry. You can try a narrow or a broad definition with pros and cons. A narrow definition will focus more on specific resources and purpose but may potentially failed to see threats and opportunities. A broad definition is focused on the “big picture” but may lose focus and use wasted resources.

The Basis for Segmentation: Customer and Product Characteristics:

Opportunities for Differentiation

Characteristics of the Buyers
Industrial buyers
Size
Technical
Sophistication
OEM/replacement

Household buyers
Demographics
Lifestyle
Purchase occasion

Distribution channel
Size
Distributor/broker
Exclusive/nonexclusive
General/special list

Geographical location

Characteristics of the Product
Physical size
Price level
Product features
Technology design
Inputs used (e.g. raw materials)
Performance characteristics
Pre-sales & post-sales services

Kotler mentions five criteria for an effective segmentation:
• Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organization with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behavior (frequency, volume, product groups, mode of payment etc).
• Relevant: The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment.
• Accessible: The segment has to be accessible and servable for the organization. That means, for instance, that there are target-group specific advertising media, as magazines or websites the target audience likes to use.
• Distinguishable: The market segments have to be that diverse that they show different reactions to different marketing mixes.
• Feasible: It has to be possible to approach each segment with a particular marketing program and to draw advantages from that.

http://www.businessplans.org/Segment.html
http://www.netmba.com/marketing/market/segmentation/
http://www.greenbook.org/marketing-research.cfm/examples-market-segmentation
http://www.themanager.org/marketing/segmentation.htm
http://www.learnmarketing.net/segmentation.htm