Market segmentation is the process of dividing the market (consumers) into groups according to certain criteria. The main goal of this action is to study the reaction of a group to a particular product, as well as the choice of the target (main) market segment. Market segmentation occupies a dominant position in any marketing research of the company's customer base .
What is market segmentation for?
Any company works for its customers. Naturally, they all differ in one way or another from each other. Market segmentation is the process of highlighting certain parameters that distinguish one group from another. One buyer can be distinguished from another by his place of residence, habits, social status, religious views and even his attitude to life. Taking into account all these differences, a company may produce products different for each segment. Each group naturally differs from each other. One of the differences is their number. Many firms focus only on the largest group. Although there are many companies that focus on one narrow segment. This allows them to avoid a lot of competition and have regular customers. Segmentation provides an opportunity to study better their customers, as well as to identify which groups do not use the services of a particular company. Thus, market segmentation is an integral part in the activities of any company. This phenomenon is based on certain principles.
Market Segmentation Principles
Segments may differ in several ways:
- By geography. Consumers can be divided into urban and rural population, as well as by place of residence - by region, city and even country.
- By demographic grounds. The most common is the separation of potential customers by age, income and marital status. Among the additional: religion and occupation.
- On a psychographic basis. The division of consumers is based on the characteristics of a particular personality. There are various methods for determining the psychographic type of a person by which market segmentation occurs. Example: a person can be attributed to one of two groups - to psychocentrics or allocentrics.
Among other signs, consumers can be distinguished by their relation to products, by the style of consumption and by personal characteristics.
How to select segments
The choice of a product may be affected not only by one age of consumers, but also, for example, by income level or geographical location. Therefore, the more criteria will be highlighted when studying consumers, the more clearly the whole situation on the market will be visible. At the same time, a large number of signs significantly complicates the situation. Simply put, the more segments, the fewer consumers in each group. How many segments to allocate and by what parameters depends on the individual characteristics of the enterprise.
Thus, market segmentation is a process that must take place according to a certain scheme, depending on the goals of the enterprise.