This briefing on Market Segmentation was prepared by Ashley Foley Roberts while an Accounting major in the College of Business at Southeastern Louisiana University.

Introduction

Market segmentation is a very important concept that has changed a lot over the years. When used properly, market segmentation, in combination with corresponding product differentiation, can be used by companies to gain an advantage. This concept requires that customer needs be analyzed so that a better understanding of those needs can be portrayed through customer satisfaction.

The Idea in a Nutshell

Market segmentation refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways. Market segmentation can be traced all the way back to the early 1800’s. DuPont, formed in 1802, was involved in market segmentation from the first time a shipment of raw materials was sent to the U.S. Markets are broken down into categories, based on certain important characteristics and differences, enabling businesses to reach out to more people in more effective ways.

The 10 Things You Need to Know About Market Segmentation

1.    Markets are segmented in many ways. Some of these ways are: by geography (region, population density, climate), demography (sex, age, income, race, family size, occupation, education), psychographics (interests, opinions, values, attitudes), and behavioralistic factors (brand loyalty, occasions/holidays, benefits sought).

2.    Cultural differences are extremely important in segmentation. A business needs to know that Islamic law forbids the consumption of ham before trying to market ham in an area where Islamic law is abundant. Businesses need to understand and be knowledgeable of traditions in different countries.
3.    Economic development is equally important in market segmentation as cultural differences. Consumer behavior is heavily influenced by the development of the economy in which they live. Extra, non-necessity type luxuries, such as air-conditioning, power steering, and power windows in cars are not marketed as much in less-developed countries, as vehicle reliability is more important in these countries and a purchase of this nature could account for a major portion of the buyer’s income.

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4.    Middle class is split into six segments due to new research. These segments are bargain-hunters, daily mail disciplinarians, comfortable greens, urban networkers, deserving down-timers, and squeezed strugglers.

5.    Market segmentation is becoming easier through the use new media avenues such as blogs, social networks, and sophisticated market research. Consumers are easier to reach today, making important information used for segmentation more readily available.