Article by Benson Mmari
Market segmentation is the process of dividing an entire market up into different customer segments. Targeting or target marketing then entails deciding which potential customer segments the company will focus on. Marketing segmentation always comes before targeting, which helps a company be more selective about who they are marketing their products to. Marketing segmentation and targeting are equally important for ensuring the overall success of a company
Step One – Define the market
The first step in creating market segments is to clearly define the market of interest. As discussed in the markets, sub-markets and product-marketssection, it is important not to define a market too broadly.
For instance, let’s assume that you are looking to segment the market for a firm that operates a chain of book stores. It would be too top-level and too awkward to define the market as all retailing consumers, as it is unlikely to lead to any meaningful segmentation.
Step Two – Create market segments
Now that we have defined the product/market clearly (which we will refer to as ‘the market’ from this point on), we need to determine what types (segments) of different consumers form that overall market. To do this, we need to review the list of segmentation bases/variables and choose two or three of those variables that we think (or know from market research) affect the purchasing behavior of book consumers.
Step Three – Evaluate the proposed market segments for viability
Now that we have developed some market segments we may be required to evaluate them to ensure that they are useable and logical. This would happen in a real-life firm, but it may not form part of your particular task.
To do this, you need to quickly assess the segments against a checklist of factors. This is discussed in more detail incriteria for effective segmentation
Step Four – Construct segment profiles
You may be required to describe the segments (develop a segment profile). The following is a checklist of factors that you might consider. For some of these items below you may not know actually – in that case either make a logical assumption or do not include the factor in the segment profile. Remember that the task here is to describe and understand the segments a little more.
Step Five – Evaluate the attractiveness of each segment
If you are required to select one target market from you list of market segments, then you need to use some form of objective assessment. Again, this topic is covered in detail in how are target markets selected, but as a quick guide you should use some of the following factors in assessing the attractiveness of each market segment.
Step Six – Select target market/s
Using the assessment information you have just constructed, you can select the most appropriate target market for the firm. While there are many factors to consider, you should at least take into account: the firm’s strategy, the attractiveness of the segment, the competitive rivalry of the segment, and the firm’s ability to successfully compete.
A brief description of the various main business segmentation bases is outlined in the following
Geographic location: Where does the organization operate?(Could be multiple locations)
Behavioral/operating practices: How does the organization undertake its purchasing decisions?
Culture/personality :What is the management style of the organization?
Geographic location/s: Country/continent, In which countries do they operate?,
Region/area of the country, Does the firm have one office only
Number of outlets, or potentially 1,000s of outlets?
Geographic spread: Does the firm operate in one geographic area, or spread over a wide area?
Business description: Industry, What industry do they operate in?
Size (by staff or outlets), How many staff do they have, or how many outlets do they have?
Behavioral/operating practices: Do they have a centralized purchase decision-making process?,
Are they generally loyal to suppliers or do they frequently switch?, Are they fast or slow
