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Advantages of market segmentation

Paper Type: Free Essay Subject: Marketing
Wordcount: 3098 words Published: 25th Apr 2017

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A company must examine the different needs and wants of the market. They must look at their internal strengths and weak points as well, they must consider opportunities available in the market. Most important factors which require attention like mission, vision, values attitude, norms and standards of the company. Keeping an eye on the competitor’s strategy will provide a competitive advantage. There are many other factors which can help companies in deciding their position in the market like social and cultural factors, technological and political aspects, moreover economic and demographic environment (Croft, 1994).

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Market segmentation is a practice of dividing a targeted market into different groups of customers having different needs. These groups want market with separate products and services or market mix. Basically it is the classification of consumers into different groups having different needs, behavior, income level and characteristics. Market segmentation is mainly divided into four different group i-e first demographic segmentation, second geographic segmentation, third psychographic segmentation and fourth behavioral segmentation. These four basic groups can define market segmentation for any kind of product and service.

First of all we need to understand the basic terms like what is a market? What is market segmentation? What is Marketing Mix? (Croft, 1994).

What is Market?

A market is defined as a collective group of organizations, people having needs for manufactured goods and services having ability, willingness and authority to buy such products and services (Ted, 2000).

What are types of Market?

Mainly, there are two types of markets;

Consumer markets (consumers market intend to use products and they do not make profit out of it).

Organizational Markets (directly and indirectly organizations are involve in sale and purchase of products and they are involve in making profit out of it) (Ted, 2000).

What is Market Segmentation?

Market segmentation is greatly passed on as dividing buyers into small groups having similar needs and wants. These groups must respond to the common market actions. These defined groups of individuals, organizations and families with homogeneous needs respond to the market or promotional offers made by the companies. Market segmentation is a newly customer-oriented term in today’s world carrying modern marketing philosophy. It helps in learning needs, wants and expectations of the target customers. It also provides better sales opportunities to the firms and satisfaction to the consumers (Weinstein, 2004).

Market segmentation is a process of dividing a large homogeneous group of customers with common needs, wants, and characteristics. It simplifies the marketing process for the companies. It allows marketers to focus on their advertising plan for their targeted customers. Otherwise they only can advertise their products and hope that it will attract audience. Market segmentation can be more effective and efficient as compare to the traditional marketing. Marketers only focus on specific segments. Whereas, it is an acceptable fact that markets are not homogeneous. Target audience is very large having dissimilar needs and wants (Weinstein, 2004).

What is Marketing Mix?

Marketing mix is basically called 4 P’s of marketing. Major decisions made by the marketing managers are based on Four P’s. Four P’s are changeable. These factors are controllable in order to best suit and satisfy the target customers.




Promotion (Lilien, 1983).


Product is basically a physical object (product and or service) offered to the customers by firms. Aspects which are taken into consideration regarding a product are its look which is its appearance, packing, service and its warranty.


Price of a product includes its list price, discounts attached with i. Profit margin is taken into consideration in comparison to the competitors price.


Place define distribution point, logistics and making product reachable to the targeted customers in the markets.


It is related with marketing, advertisement of the product. Decisions about promotions of the product include how to advertise, how to generate markets, public communication (Lilien, 1983).

Objective of Market Segmentation

Its main objective is to come up with marketing mix which cold meet the customer expectations precisely of targeted market. Market segmentation is a strategy which includes a large market into subsets of consumers with common needs and purpose for the goods and services available to them in the market. The subsets involve in the market can be identified using different ways like demographics. The main purpose of market segmentation is to help out companies in understanding customer base and needs (Dunbar & Malcolm 2007).


As already defined market segmentation is the base for providing and developing targeted business plans. A segmented market approach offers a range of benefits for customers and for the businesses as well. The criteria marketers can use to do market segmentation successfully. Criteria which marketers use for market segmentation is that: (Croft, 1994).

High Profits

It must have enough profit. It is very difficult to increase the product prices in the market. On the other hand, it is possible to enlarge premium segments in which customers agree to a higher price level.

Opportunities for Growth

By market segmentation organizations can create their market and traditional customers can be attracted. By segmenting markets organizations can create their own niche products and thus attract additional client groups.

Stimulating Innovation

Market segmentation endow with information about the small groups of targeted market with particular needs. If a product meets and exceeds a customer s expectations by adding arch note value the customers normally is fine to pay a higher terms for that product.

High Market Shares

The market strategies can be used in targeting high market shares. It gives strength to the brand and it also ensures the profit margins for the company. Very often, a criterion used by the companies help is identifying their potential to serve the target market. Segmenting a market is a process whereby a supplier of goods and services chooses to segregate group of prospective customers together on the basis of set of common characteristics that have significant. Lifestyle, personality, income, and age such variables are included in the market segmentation and these are considered as common market segmentation characteristics. These characteristics make segmented market to respond differently to the market activities.

With the help of marketing segmentation a company can provide great value to its customers by developing marketing mix. Marketing mix can address specific needs and wants of the targeted segment. Segmentation is basically a basically a process which consist on segmentation identification, segment selection and creating marketing mix for the targeted segmentation (Croft, 1994).

Facilitates Consumer-Oriented Marketing

Marketing segmentation provides basics for formatting marketing mix and its helps in achieving targeted objectives. Segment approach is better an effective idea to reach out target groups. Segment-wise approach is better approach as compare to integrated approach for the whole targeted market.

Facilitates Introduction of Suitable Marketing Mix

Market segmentation provides better and clear idea to a manufacturer in understanding the needs and wants of targeted customers. It helps in understating their behaviors. A producer can meet customer expectations in an accurate manner.

Facilitates Introduction of Effective Product Strategy

With the help of market segmentation production plan becomes compatible with the needs and wants of the customers. There is an effective crystallization of specific needs and wants of the targeted customers. Market segmentation provides better match between customer needs and products offered by the manufacturers (Croft, 1994).

Facilitates the Selection of Promising Markets

Market segmentation helps in identification of targeted segments in the market which can be best served and facilitate within limited resources available to the organization. The selection of promising market can help organization in concentrating on profitable and productive segment of targeted market.

Facilitates Exploitation of Better Marketing Opportunities

Market segmentation helps organizations in exploration of better market opportunities. Identification of similar consumer becomes easy for marketing manager in the targeted market. It also facilitates markers in utilizing available resources in best and productive manner.

Facilitates Selection of Proper Marketing Program

Marketing segmentation helps marketing manager in developing best marketing mix program for the targeted customers. Adequate and accurate information about the target segments is available to the marker through some reliable resources. Consumers are attracted through proper marketing programs which are developed based on the needs and expectations of the target consumers in a given market.

Provides Proper Direction to Marketing Efforts

Market segmentation provides proper direction to market efforts in order to reach out target customers. Only profitable markets can be reached out through proper direction. Unprofitable markets can be avoided in order to avoid irrelevant cost. Marketers can on only concentrate on promising segment of market only. Thus market segmentation provides better and effective marketing efforts in order to achieve set marketing objectives.

Facilitates Effective Advertising

A marketer can work out better and effective advertising plan in order to attract a target segment in specific market. Market segmentation can make advertising effective and efficient in true meanings.

Provides Special Benefits to Small Firms

Market segmentation can provide special benefits to small businesses. Available resources for small firms in the industry are limited and such firms can best utilize the available resources through market segmentation in a new market. Marketers who use proper directions, effective advertising, select proper market programs in order to explore better marketing opportunities they can reap good profits.

Facilitates Optimum Use of Resources

Market segmentation provides efficient an effective utilization of available resources. Optimum usage of available resources to the firms can make the marketers earn good profits. A marketer will select the most promising target market and concentrate only on profitable segment and will have the optimum utilization of resources. This provides best outcome to the firm in terms of sales and marketing (Weinstein, 2004).

There are many advantages of market segmentation like:

It helps a company in understanding the needs and wants of its targeted customers and markets.

Market segmentation also helps in targeting and positioning its products.

This also provides a platform for better two-way communication between the buyers and the companies.

It provides platform for preserving and maintaining good and effective relationships.

It helps in holding on to the existing customers and attracting new ones.

It also helps in improving customer services.

In today’s market and economy market segmentation appear effective enough to sell a product efficiently.

Objects can be achieved.

Target market must have different needs for the products and services.

There must be similarity in consumer needs.

Company must have access point to the target market.

Market segmentation provides efficient utilization of resources.

Market segmentation makes the process more effective for the company.

It provides competitive advantage to the company.

It also directs marketing mix for the company.

Segmenting a market provides cost effectiveness and results in enlarging market share and provides profit margins.

Better customer understanding based on market segmentation.

Segmenting provides better resource allocation (Weinstein, 2004).


Marketers use criteria for market segmentation based on; group identification, segmentation based on behavior, access point to reach out targeted market. Market segmentation criteria based on;

Homogenous: Targeted customers having similar needs and wants and characteristics.

Heterogeneous: Targeted customer having needs and wants very different from each other.

Substantial: Customers falling in the targeted segment are large enough and have large needs and wants.

Competition: Keep an eye on the competitors product, price, distribution channels and how large market segment they are catering.

Resources: A company must have much resource that it could meet the variation in demand (Baker, 2003).

Bases for Market Segmentation

Behavioral Segmentation:

Demographic Segmentation:

Geographic Segmentation:

Psychographic Segmentation:

Group Identification: segmentation which is done through group identification must be homogeneous and heterogeneous across the grouping. This first stage of segmentation has the choice of using special sets of criteria including individual characteristics of the customer, benefits wanted by the customer, and behavioral measures of the consumer. Inside of these categories the choices obtainable are in fact overwhelming and in many cases different segmentation approaches will guide the approach along with different paths. Utilizing multiple marketing segmentation approaches is recommended by several market experts.

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There are no guidelines for selecting and utilizing variable when segmenting. The identification of segmentation is the most inventive element of the segmentation process. Moreover, identification of segment is the greatest opportunity for the company in creating competitive advantage for the reason that company can meet the needs and requirements of the customer better than their competitors. This competitive advantage can improve the financial position of the company and the relative cost position as well (Baker, 2003).

Behavioral Segmentation: it is the true segmentation which meets the practical requirement for reaching out similar market mix. By dividing segmentation variables into three different subdivisions like personal characteristic, benefits sought and behavioral measures. Behavioral segmentation can be explained in broader term. Personal characteristics are a set of all variables that can define or describe particular individuals. These include a vast collection of personal qualities, exposure, demographic, geographic, geo-demographic and lifestyle and psychological factors. Today, psychological and geodemographics have become popular segmentation instrument in segmentation process. Geodemographic models are theoretically based on the assumptions that neighborhoods holds homogeneous groups of individuals, that such group can be clustered and share similarities across geographies.

Psychographics categorize consumers by their values and lifestyles. The study of lifestyle is about the interests, cultural and social values of the individuals. Psychographics segmentation is very important is the initial segmentation and it is very important for the segment evaluation and marketing mix phases. Psychographics segmentation can be very useful in the identification of market behavior (Baker, 2003).

Segment Evaluation: This is the second stage of marketing segmentation. Marketers do evaluation of the targeted segment this element defines the criteria for market segmentation. It can measure the profitability.

Feasibility and cost: This criterion is reaching out targeted segment in term of access point and the cost involved in the process.

Demographic Segmentation: It takes place when the targeted market is divided to different groups on the basis of age, gender, characteristics, income level, education, religion and the nationality as well.

Geographic Segmentation: it is the most straight forward method of market segmentation through which market can be segmented based on the region having different believes, cultural and behavioral prototype .

Psychographic Segmentation: This segmentation takes place in order to divide different groups on the basis of social class they live in, education they have, occupation they adopt, and lifestyle they like to live with.

It has been defined that there are five basic criteria for an effective segmentation which states that Market Segmentation should be done on the bases of: –

Relevant: – Market segmentation must be relevant that it must show profit and growth.

Accessible: – The targeted customers must be reachable so that they could be served by the company easily.

Distinguishable Target Market: – the target customers and market must be mixed and able to demonstrate dissimilar reactions to diverse marketing mix.

Feasible Segmentation: – the organizations must have an ability to draw a cost effective marketing plan for its targeted customers and markets.

Measurable Variables: – The values of the variable used for market segmentation must be measurable (Baker, 2003).

Concluding that market segmentation is very important marketing strategy for the marketers not only of a small firm but for the large firm as well. Market segmentation helps a firm in uncovering target audience and it also helps in matching market opportunities to the available resources. Market segmentation is a modern marketing philosophy. It answers a very important question in a precise manner that “whom a firm should sell its products and what should be sold out”.


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