What is market segmentation?

Market Segmentation Definition:It is the process of dividing the whole market of a good or service in groups of people with similar needs. By making this division there is a high chance that each group responds in favor to a specific market strategy.

There is a good example that may help to clarify this definition. The technological advances in communications via cellular telephony offer good market segmentation examples. At the very beginning, cell phone service suppliers only focused on a wide market and practiced a small marketing segmentation.

However, in the meantime when more competitors joined into this market, the companies were forced to apply new strategies mainly focused in specific market segmentations such as small businesses, families, younger customers, and consumers in search of media communication via pictures and messaging.

Any marketer who wants to use the marketing segmentation as part of its marketing strategy should consider applying the market segmentation variables. These variables are parameters that identify the dimensions which distinguish the behavior of a market. By their classification, there are two main variables that represent the dimensions of a market:

Benefit Variables

Benefit variables are related to customer needs as they are useful to identify the market segments in basis of the benefits expected by customers. For example, the market for the tooth paste has many benefit segments. The main benefit for parents could be the prevention of tooth decay in their children. Meanwhile, the benefit for teenagers could be a fresh breath. In both cases, the tooth paste is the product with two different market segments.

Demographic Variables

Demographic variables are referred to certain characteristics that describe and help to determine whether customers are potential buyers. Some examples of demographic variables are marital status, gender, occupation and average income. By nature, demographic variables are insufficient for a full market analysis by themselves. It is impossible to implement any prediction and marketing strategy having only the data provided by these variables. This is because these variables are to general and provide generic information. Small businesses tend to use demographic variables as part of their market segmentation.