Market Segmentation is the division of market into different subsets that involve consumers with similar tastes, preferences and demands. Companies use this phenomenon to understand the preferences of various customers and eventually target the products towards them.
Need for Market Segmentation
As the preferences with respect to the products vary from customer to customer, it becomes very difficult for companies to satisfy them. However companies cannot manufacture products taking into account every customer preference. This is where the concept of Market Segmentation helps companies attain their goals.
The other important criteria’s that account to organizations long term benefits are:
- The segments should be measurable
- The segments should be accessible
- The segments should have large enough to target the products
- The segments response should be accurate with respect to different marketing mix
- The segments should be stable enough to minimize costs with respect to demand
The customer characteristics can be segmented into Geographic, Demographic, Psychographic, and Behavioristic. Companies usually segment the market based on these characteristics.