Segmentation – definition and importance

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Segmentation

Segmentation is a very important topic in marketing. Marketing is a process which usually consists of four  major elements namely situation analysis, marketing strategy, marketing mix decisions, and implementation & control. Segmentation is one of the elements in marketing strategy.

Definition of segmentation

According to Kotler (1994), segmentation refers to the subdividing of a market into distinct and increasingly homogeneous subgroups of customers, where any subgroup can conceivably be selected as a target market to be met with a distinct market. It is the process of defining and subdividing a large market into identifiable segments. Smith (1956) is known to be the first person to have identified the importance of segmentation.

Importance of segmentation

Segmentation helps organisations classify people into homogeneous segments. Once a number of segments are identified, organisations can decide which segment or segments are to be catered for. It gives a sense of direction to organisations. Through this process, organisations decide which market to pursue. Organisations may not be able to pursue all the potential markets at once. Therefore, subdividing of the market is necessary so that organisations can apply their optimum efforts to serve the chosen market.

How to segment a market?

A market can be segmented into subgroups of customers by applying a number of variables. For example, geographic, demographic, and behavioral are some of the most widely used variables. The discussion that follows addresses some of these variables.

Geographic segmentation

A market can be segmented geographically. Division of the market is based on the location of the target market. For example, a company may decide to divide the whole UK market into four subgroups i.e. England, Wales, Northern Ireland, & Scotland. Likewise, a company may divide its markets in terms of subgroups such as Europe,  Asia, Africa  etc.

Demographic segmentation

It refers to dividing the market in terms of factors such as age, gender, income, and some others. For example, clothing retailers usually segment their market in terms of age and gender. Therefore, kinds, women, and men sections are very common in clothing retailers.

Behaviour segmentation

A market can be divided based on potential customers’ attitudes towards products and to its promotional appeals. For example, some customers are heavy buyers while others are occasional. Likewise, some groups can be classed as first-time users, regular users, or ex-users of a product/service.

The article publication date: 30 September 2016

Further reading/references

Lancaster, G. & Reynolds, P. (2004) Marketing, 1st Edition, Palgrave Macmillan

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Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.