What is Market Segmentation? Introduction; The economists while describing pure competition assume that all buyers are alike and consumer behavior is unidimensional based on the concept of the economic man model. Market segmentation is the activity of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics. However, the psychologists recognize all buyers are different.

Know and learn about the topic of Market Segmentation; Introduction, Definition, Benefits, and Criteria.

Marketers recognize the importance of heterogeneous demand. Hence, they are keenly interested in subdividing or segmenting the market. A segment can be a group of people with similar or homogeneous demand and the enterprise can offer tailor-made marketing mix for each market segment or subdivision. A marketing segment is a meaningful buyer group having similar wants. Segmentation is a customer-oriented marketing strategy.

Market segmentation gives formal recognition to the fact that the wants and desires of consumers are diverse and we can formulate a specific market offering to specific categories or segments of the market so that supply will have the best correlation with demand. Varied and complex buyer behavior is the root cause of market segmentation.

Most companies operating on all India basis have divided the national markets into various zones of regions e.g. Northern India, Southern India, Eastern India, Western India, Central India, etc. These zones may further subdivide according to segments of markets. Segmentation or subdivision of the market is one of the basic strategies based upon the modern marketing concept.

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Meaning of Market Segmentation:

Market segmentation is the activity of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics.

Segmentation gives special emphasis on the demand side of the market. The marketing effort is to tune with consumer or user needs and requirements. Segmentation implies the bending of supply to the will of demand as far as feasible and desirable. It recognizes that there are several demand schedules and not necessarily a single demand schedule or curve.

For each demand schedule representing a group of buyers with similar needs and characteristics, marketers need to prepare separate and precise market offering or marketing mix. Market segmentation is a method for achieving a maximum market response from limited marketing resources by recognizing differences in the response characteristics of various parts of the market.

In a sense, market segmentation is the strategy of “divide and Conquer”, i.e. dividing markets. Marketing strategy is adjusted to inherent differences in buyer behavior. For different groups of customers, i.e. market segments different sets of marketing strategies are developed.

Definition of Market Segmentation:

As the define Market segmentation is a process of dividing the entire market population into multiple meaningful segments based on marketing variables like demographics (age, gender, etc), geographic, psychographics (lifestyle, behavior), etc. Market segmentation in marketing is identifying a set of homogenous segments having similar needs, properties & demands which can use by a company to sell their product/service more effectively.

Importance of Market Segmentation:

Market segmentation is an important aspect for any business as it helps them slice the market into smaller groups or segments. Which can then identify base on their needs and can cater to? Market segmentation reduces the population in the market and gives a much more addressable audience rather than giving random groups of people.

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Having similar groups would enable companies to more focused in terms of their product offerings, product differentiation strategies, marketing strategies, pricing strategies, etc. This would help companies mitigate unnecessary risks, reduce costs, target customers better, have better retention and generate more profits. Hence, segmenting the entire population of the market is essentially critical for any business to prosper.

Benefits of Market Segmentation:

Market segmentation reflects reality in a marketing situation. Consumers have different needs and preferences. Hence, in reality, market demand is heterogeneous and not homogeneous. When differences in customer needs are analyzed, marketers can exploit the marketing opportunities and fulfills the needs.

This can yield profits and prospects for growth. Segmentation ensures higher customer satisfaction and improves the effectiveness of the marketing program and enables the managers to charge a better price for their offer.

Market segmentation offers the following specific benefits;

  • Marketers are in a better position to locate and compare marketing opportunities. The market can define more precisely in terms of customer needs.
  • When customer needs are fully understood, marketers can effectively formulate and implement marketing programs that will tune with the demands of the market.
  • Marketers can design their products and marketing communications as per the market segments and ensure more response.
  • Competitive strengths and weaknesses can assess effectively and marketers can avoid fierce competition and use resources more profitably by catering to customer demand which is not being met by rivals.
  • Since the customer is the focus of marketing effort segmentation leads to the more effective utilization of marketing resources. We can have precise marketing objectives. The marketing program is tailored exactly following the needs of a specific market segment, and product, price, and promotion can have the best coordination.
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Market Segmentation Introduction Definition Benefits and Criteria
Market Segmentation; Introduction, Definition, Benefits, and Criteria. #Pixabay.

Criteria for Segmentation:

The following criteria below are;


The attributes selected for segmentation must be measurable demographic and socio-economic characteristics are objective and measurable. But personality, lifestyle and psychological factors governing buyer behavior such as motivation, perception, attitude are subjective and non-measurable attributes.

In such situations, these non-measurable characteristics should link with tangible characteristics to achieve a meaningful segmentation. We can approximately identify members of the segment based on some common characteristics or behavior patterns. Obtaining data is not easy when the segment is defining in terms of benefit or behavioral characteristics.


The segment identified should be within the reach marketers through suitable means of communication and distribution.

Market Responsiveness:

The identified segment must respond favorably to the marketing effort. To know whether correct segmentation has been achieving or not has paramount importance.

Effective Demand:

The segment must have a family big size of demand to make any marketing effort viable.

Bases of Market Segmentations:

There are many ways to group customers in segmenting the market. Broadly speaking, we have two main approaches to identify market segments.

  1. People-Oriented Approach (Also called customer personal characteristic approach): The customer can claim by various customer dimensions such as geographic location, demography, socio-economic characteristics, and psychographic characteristics.
  2. Product-Oriented Approach (also customer response approach): Customer response or buyer behavior may consider about product benefits, product usage, store patronage, and brand loyalty. This approach identifies the differences in buyer behavior to know why consumers buy a certain product. Also, buyer behavior involves psychological factors such as buying motives, attitudes, perceptions, preferences.
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