Market Segmentation Strategy

Market segmentation strategy involves dividing the market into groups, where individuals have similar needs and wants for services and products. It could also be a segmentation of people on the basis of behavior, culture, and economic status.

To get a clearer picture of what is market segmentation, one can always look into the definition provided by business dictionary.com. It is defined as, "Process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics".

Before marketing the products or services, one needs to understand their customers, and find ways and means to satisfy their wants. This is imperative to stay ahead of the competition and build the brand. This is done through extensive market research.

Although it is not possible to satisfy individual needs and understand all of them, a clearly defined market segmentation strategy will help create a market to cater to groups of individuals that will make economic sense to mass produce and distribute.

The concept of target market segmentation strategy also falls under this blanket, except the former recognizes and understands the diversity of customers and provides them with products and services that suit their specific requirements.

A successful market strategy strives to understand different segments and its different needs; works on the exhibited common wants; and responds immediately.

How a market is segmented is based on certain variables. Variables used for segmentation include; behavioral, demographic, psychographic, and geographical differences.

Segmenting people according to their lifestyle and values, and how they translate into consumption or purchases of products or services is what psychographic segmentation is all about.

How one's interest, opinions, values, attitude, and the activities they perform, affect their choices and why a group of people would lean towards one product more than others. A high status would translate into an expensive flying habit, while a thrift value will translate into an economy flight.

Geographical segmentation is done by dividing people (markets) into different geographical locations. The country, state, or neighborhood, the king of gentry, climate, size of a place segmented into size of its age wise population, etc., all play a role in devising market strategies.

This helps the producer and the marketers to understand what will sell and what won't. For example, a market for winter wear would definitely not work in warm regions.

Demographic segmentation refers to a wide study of potential customers. While marketing a product, many variables like age, gender, education, income, family size, occupation, socioeconomic status, culture, religion, language, and nationality are taken into account.

There are many instances where such a segmentation has worked very profitably. This segmentation plays a vital role in determining whether a product can be mass marketed or designed for a specific clientèle.

Behavioral segmentation is based on the customer's needs and subsequent reaction to those needs or towards the purchase of intended products and/or services.

This study is conducted on all variables that are closely related to the product itself, like loyalty to a particular brand, cost-effectiveness in terms of benefits and usage, circumstances responsible for the purchase, whether the customer is a regular, a first timer, and whether the readiness to buy is linked to status.

Before a company launches its services, it not only studies a market segmentation strategy, but relates it in terms of a product life cycle theory. Both the concepts combined, give the marketeer a clear idea of what would be profitable, or otherwise.