Market Segmentation

“Market Segment is the process of splitting customers, or potential customers, in a market into different groups, or segments”. Customers, therefore segment themselves and what the company must focus on and understand the needs that customers are seeking to satisfy and, in doing so, understand the motivation that drive the choices made by customers. The problem with segmenting markets according only to the product or services offered, or the technology type is that in most markets, many different types of customers buy or use the same products or services.

Variables such as sex, age, lifestyle and so on, when used to define segments, are by implication claiming, for e.g., that every 30-35 years old will respond to the same proposition. Rather like demographics, segment based on geo-graphic areas, however tightly defined, assumes that everyone in a predetermined area can be expected to react to a particular offer in exactly the same way

Routes to markets are becoming more sophisticated and complex, and are also becoming an increasingly important component of many winning customers propositions. Psychographics is the study of personality, values, attitudes, interests, and lifestyles. Psychographic is a study of individual or a community that can be valuable in the fields of marketing. Segmentation models in international marketing tend to consist of geographical groups, such as Western Europe, Eastern Europe, North America, ASEAN, Australasia and so on. Unfortunately, such grouping are of very limited value as actionable marketing propositions, since they bear little relationship to actual consumption or usage patterns.

Market granularity is the degree to which customers needs and motivations differ within a defined market. It can range from near homogeneous, in which all customers share very similar needs and motivations, to heterogeneous when the opposite applies.  The most important point about organizational structure is that there are a number of issues that all firms have to address. They are – Geographic location, function, products, markets, channels. Increasing competition has forced organization to agree that the 2 main issues are products and markets which is why many organizations have ‘product/technology managers’ and/or ‘market managers’.