Market Segmentation is the process of grouping a market into smaller subgroups. This is not something that is arbitrarily imposed on society : it is derived from the recognition that the total market is often made up of submarkets (called segments). These segments are homogeneous within (ie.: people in the segment are similar to each other in their attitudes about certain variables). Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feelings about a marketing mix comprised of a given product, sold at a given price, distributed in a certain way, and promoted in a certain way.
The requirements for successful segmentation are:
- homogeneity within the segment
- heterogeneity between segments
- stability of segments
- segments are measurable and identifiable
- segments are accessible and actionable
- segment is large enough to be profitable
The variables used for segmentation include:
- Geographic Variables
- region of the world or country
- country size
- climate
- Demographic Variables
- age
- gender
- sexual orientation
- family size
- family life cycle
- income
- occupation
- education
- socioeconomic status
- religion
- nationality
- Psychographic Variables
- personality
- life-style
- values
- attitudes
- Behavioural Variables
- benefit sought
- product usage rate
- brand loyalty
- product end use
- readiness-to-buy stage
- decision making unit
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. A statistical technique commonly used in determining a profile is cluster analysis.
see also: marketing, target market, consumer behaviour