The market segmentation

Category: Market, Microeconomics
Last Updated: 03 Mar 2020
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Market segmentation is the process of identifying markets and then dividing those markets into groups.  The groups consist of characteristics that are similar and they have similar product needs.  The groups can consist of people or organizations.

A market consists of people or organizations that have similar needs of a product, have the ability, willingness and authority to buy products.  There are two types of markets the consumer market and the organizational or business market.  The purpose of the consumer market is to supply goods and services to the customers for their own benefit and not for sale.  The organizational or business markets are markets that are business oriented such as the products in the markets are usually sold thus the businessmen sell them for a profit.

The reason behind the dividing the market is to identify groups of customers who have similar tastes and preferences, to understand the customers behavior so that the right kind of goods are delivered to them and to ensure that the right marketing strategies are identified so as to ensure that the different preferences chosen to satisfy the needs of the customers If a product can be from a particular company  whose cost of advertising is low thus  it can be  in a position to boost sales of a company  since the cost of maintaining it is low and their returns can increase with time..

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Successful market segmentation is one that has the following characteristics: segment members that are internally the same and externally different or heterogeneous.

The market can be segmented based on whether it is a consumer market or an industry or business market. In the customer market the basis of segmentation is based on variables such as the geographical, demographic, and psychographic and the behavioristic variables. The psychographic segmentation is a segmentation that is used to describe the customers in terms of their activities, opinions, emotions, values, motivations and lifestyles.

These enables the producers of the products to know which product are beneficial to the customers in terms of their preferences and tastes.  The application of this segmentation enables the manufactures to improve on their mode of developing their products, brand positioning, targeting and advertising so that the sales volume of the product can increase and this can result in greater returns for the company.

The demographic segmentation involves classifying people who come from the same geographic boundaries and those who possess the same goals for example in a banking industry the introduction of automatic teller machines can enhance efficiency in the business because it can enable the customers to access cash quickly and to enable them complete transactions promptly since the machine is located in a place where customers are many hence the service delivery process is efficient for this customers.

Geographical segmentation refers to dividing segments based on their region of the world, country size and density of the area. In the rural areas we have products such as the farming equipment and material because they are mostly used there while the urban centers consists of products that have been produced and manufactured and are ready for consumption since the residents there do not have land to cultivate products for consumption for themselves and for their children.

The market can be segmented in the industrial market using the following variables: Location, company type and the behavioral characteristics.

In case of the location variable the businessmen consider this factor seriously because the distance between where the source of the product is made and the market can be too big such that the cost of transportation can be too high for the businessmen to afford and thus render the market to be unprofitable thus this issue should be addressed so that it can be eliminated in the future.  .

In case of company type segment the customers can be classified according to the company size, industry, decision-making and the purchase criteria.  The customers can prefer a commodity based on how well the product has been in the market and whether the industry in which it is produced is known because customers tend to accept a product, which has been in the market for a long time. (Steenkamp and Ter Hofstede 2002)

The behavioral characteristics in the industrial market are: usage rate means the frequency in which a product is consumed if it is high it means that its demand is high thus it supply is likely to be high for example goods such as the consumable’s such as salt ,sugar there is a likelihood of being demand many times because people cannot stay without them,  buying status that is customers who regularly consume a product  can make the target market to perform effectively because of their consistency in purchasing their products.The procedure of purchasing the product is also determined such as the sealed bids or negotiated procedure.  In the sealed bid procedures customers purchase a product based on the price tags of the product this type of segmentation is important to consider since it enables the produce to always have adequate stock of the product so as to avoid stock outs.

The criteria that are used in identifying a market segment is that it must be identifiable that is a customer must be in a position to recognize the segment that is appropriate for them since customers tend to consume a product on the basis of how they have the product in the market and its quality.  It must be accessible that is the segment must be within the reach of the customers thus the communication and distribution channels must be improved so that the product reaches the customers within the given period of time that the marketers must advertise their products so that customers can be made aware of the existence of the product..

The segments must be substantial that is they must be large enough so that the resources that are used to avail them to the customers are cost effective that is the cost of product should not be too costly that is the cost of product should not be too large as compared to the revenue that is derived from them. The marketing needs must be unique so that they can be in position to capture a wider market so that customer can be able to change to the new brand in the market and thus increase the sales volume.  The segments must be stable so that the cost of maintaining the product is not too high than the returns that are derived from it.

Industrial market segmentation is a segmentation that is used in guiding the industrial and business customers in their decision-making strategies.  The goal of these segmentation is to identify the customers in terms of whether they are potential customers so that their behavior can be identified so as to enable the marketers to identify the important issues that affect them directly .The factors that can affect them are: the prices, programs or solutions that can enable the company to increase their returns within a given period of time.( Haas, R.W. and Wotruba, T.R. 1983).

Targeting refers to process of identifying segments that need to be addressed.  The companies tend to choose some segments and to downplay other segment because their aim is to look for segments that produce as much returns to the company as possible.  The target market involves people such as the end user companies’ procurement managers, company houses contracting companies and the external sales agents.

Target audience involves individuals that influence the purchasing decision but they do not buy the product such individuals involves design engineers, architects, project managers, and the operational managers. The target markets can be identified by looking at customers who have similar needs so that the produces can channel their efforts to products that are beneficial to the customers and they suit their tastes and preferences.

Positioning involves advertising the product value to customers so as to increase the products sales volume. Positions are described using various variables and using parameters that are essential to a customer.  The customers position a product in relation to the brand or product that is within their reach.  Thus it is important for the marketers to conduct a research about how the customers rate different products and their marketing variables so that they can increase their sales volume. The markers need to improve on their marketing variables so that they can improve on their marketing strategies because the customers can determine the success of the business.  The marketers should set up strategies which are geared to having a portfolio that can ensure that their product compete with.

Positioning involves how people perceive a product that is in the market.  The products or services provide a map that enables the marketers to identify which characteristics can be compared and contrasted to another product that is competing with it so as to put in place mechanisms that will enable them to compete effectively with their rivals.

Market segmentation is therefore necessary because it enables markets of different sizes to compete effectively since markets are divided based on their segments thus the small companies can be able to compete with the bigger companies since their scale of production is limited due to their size and the shelves where goods are displayed can not be in a position to accommodate all kinds of goods unlike the big companies whose economies of scale is high due to their size.


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The market segmentation. (2017, Feb 12). Retrieved from

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