Market segmentation is a process of dividing a market into distinct groups of buyers on the basis of needs, characteristics, or behavior, who might require separate products or Marketing mixes. The main objective of market segmentation is to divide the market into different portions based on differences in customer to get better understanding of customers needs, thus to make the appropriate strategy to attain the goals.
Steps involved in segmentation process
a. Identify market – Identify the market with which you will be dealing in i.e. consumer market, industrial market
b. Identify the needs and wants – Identify the needs and wants of the market and analyze the areas of satisfaction you are attempting to provide to the market .
c. Determine dimensions: Select dimensions with which to segment the market. The dimensions used to segment the different types of markets will be organized according to type of market because the dimensions used for segmentation vary substantially.
d. Identify the segment: identify the segments in the market based on the selected dimension i.e. demographic dimension, geographic dimension.
e. Evaluate Segment: Evaluate whether the segment in which you are interested meets the four criteria for effective segmentation.
f. Create profile of customers: Create a profile of the customer identified including purchasing behavior expectations.
h. Combine the segmentation analysis: Combine the segmentation analysis with other analyses related to the product, market, and business strategy.
i. Select the Segment: Select the segments which offer higher potential.