• Market segmentation is a process that consists of

sectioning the target market into smaller groups

that share similar characteristics, such as age,
income, personality traits, behavior, interests,
needs or location. 
• These segments can be used to optimize
products, marketing, advertising and sales
efforts.
• Segmentation allows brands to create strategies
for different types of consumers, depending on
how they perceive the overall value of certain
products and services. In this way they can
introduce a more personalized message with the
certainty that it will be received successfully. 

• 1. Grouping of Customers
• The main objective of market segmentation is to
group customers based on their homogeneous
characteristics such as nature, habit, behaviour,
income, age, religion, etc.

• 2. Optimum Utilisation of Resources

• Targeting the market provides détails of the
customer and their needs. It aids producers for
marketers. If the market is segmented,
marketers can produce the product according to
consumers’ desires. So, the product will meet the
consumer’s demand, and there will not be a
waste of resources.
• 3. Better Service
• The objective of market segmentation is to
provide better service. If the market is
segmented, the marketer can concentrate all the
resources, tools, skills, and techniques, & thus it
will improve the service of the organisation.
• 4. Market Specialisation
• Market Segmentation leads to Market
Specialisation. Steady and continuous service in
the distinct markets gives full market knowledge.
It makes the marketeer expert in the market. The
products, human resources, and organisational
policies become customer friendly.
• 5. Increases Efficiency
• Segmentation minimises the size of the market.
With the decreasing size, the activities to be
performed by the market organisation also
decreases. So, the workload for the marketeer
will be decreased. It will enhance the capacities
of the marketeers. Therefore, the objective of
market segmentation is to increase
organisational efficiency.

Bases for Segmenting

Consumer Market
The four bases for segmenting consumer market are as
follows: A. Demographic Segmentation B. Geographic
Segmentation C. Psychographic Segmentation D.
Behavioural Segmentation.

A. Demographic Segmentation:
Demographic segmentation divides the markets into
groups based on variables such as age, gender, family
size, income, occupation, education, religion, race and
nationality. Demographic factors are the most popular
bases for segmenting the consumer group. One reason is
that consumer needs, wants, and usage rates often vary
closely with the demographic variables. Moreover,
demographic factors are easier to measure than most
other type of variables.
1. Age:
It is one of the most common demographic variables
used to segment markets. Some companies offer
different products, or use different marketing
approaches for different age groups. For example,
McDonald’s targets children, teens, adults and seniors
with different ads and media. Markets that are
commonly segmented by age includes clothing, toys,
music, automobiles, soaps, shampoos and foods.
2. Gender:
Gender segmentation is used in clothing, cosmetics and
magazines.
3. Income:
Markets are also segmented on the basis of income.
Income is used to divide the markets because it
influences the people’s product purchase. It affects a
consumer’s buying power and style of living. Income
includes housing, furniture, automobile, clothing,
alcoholic, beverages, food, sporting goods, luxury goods,
financial services and travel.
4. Family cycle:
Product needs vary according to age, number of persons
in the household, marital status, and number and age of
children. These variables can be combined into a single
variable called family life cycle. Housing, home
appliances, furniture, food and automobile are few of the
numerous product markets segmented by the family
cycle stages. Social class can be divided into upper class,
middle class and lower class. Many companies deal in
clothing, home furnishing, leisure activities, design
products and services for specific social classes.

B. Geographic Segmentation:
Geographic segmentation refers to dividing a market into
different geographical units such as nations, states,
regions, cities, or neighbourhoods. For example, national
newspapers are published and distributed to different
cities in different languages to cater to the needs of the
consumers.

Geographic variables such as climate, terrain, natural

resources, and population density also influence
consumer product needs. Companies may divide markets
into regions because the differences in geographic
variables can cause consumer needs and wants to differ
from one region to another.

C. Psychographic Segmentation:
Psychographic segmentation pertains to lifestyle and
personality traits. In the case of certain products, buying
behaviour predominantly depends on lifestyle and
personality characteristics.
1. Personality characteristics:
It refers to a person’s individual character traits,
attitudes and habits. Here markets are segmented
according to competitiveness, introvert, extrovert,
ambitious, aggressiveness, etc. This type of segmentation
is used when a product is similar to many competing
products, and consumer needs for products are not
affected by other segmentation variables.
2. Lifestyle:
It is the manner in which people live and spend their
time and money. Lifestyle analysis provides marketers
with a broad view of consumers because it segments the
markets into groups on the basis of activities, interests,
beliefs and opinions. Companies making cosmetics,
alcoholic beverages and furniture’s segment market
according to the lifestyle.

D. Behavioural Segmentation:
In behavioural segmentation, buyers are divided into
groups on the basis of their knowledge of, attitude
towards, use of, or response to a product. Behavioural
segmentation includes segmentation on the basis of
occasions, user status, usage rate loyalty status, buyer-
readiness stage and attitude.
1. Occasion:
Buyers can be distinguished according to the occasions
when they purchase a product, use a product, or develop
a need to use a product. It helps the firm expand the
product usage. For example, Cadbury’s advertising to
promote the product during wedding season is an
example of occasion segmentation.
2. User status:
Sometimes the markets are segmented on the basis of
user status, that is, on the basis of non-user, ex-user,
potential user, first-time user and regular user of the
product. Large companies usually target potential users,
whereas smaller firms focus on current users.
3. Usage rate:
Markets can be distinguished on the basis of usage rate,
that is, on the basis of light, medium and heavy users.
Heavy users are often a small percentage of the market,
but account for a high percentage of the total
consumption. Marketers usually prefer to attract a heavy
user rather than several light users, and vary their
promotional efforts accordingly.
4. Loyalty status:
Buyers can be divided on the basis of their loyalty status
—hardcore loyal (consumer who buy one brand all the
time), split loyal (consumers who are loyal to two or
three brands), shifting loyal (consumers who shift from
one brand to another), and switchers (consumers who
show no loyalty to any brand).
5. Buyer readiness stage:
The six psychological stages through which a person
passes when deciding to purchase a product. The six
stages are awareness of the product, knowledge of what it
does, interest in the product, preference over competing
products, conviction of the product’s suitability, and
purchase. Marketing campaigns exist in large part to
move the target audience through the buyer readiness
stages.

Advantages of Market segmentation

1. Higher Rate of Success
Market segmentation means to study your market, to be more

precise it helps to divide a bigger market into smaller modules

and lets the marketers know the potential of the

market/consumers which reduces the risk of loss and thus there

are higher chances of success for the business.

2. Increases Profitability
Market segmentation is a very effective process for business

and it helps the business to target particular segments of the

market and thus helps to find better business opportunities

pertaining to that particular market segment. The marketers can

thus, strategize their campaigns as per the chosen market

segment needs and requirements and helps to increase the

business profitability. This technique lets the companies focus

on one particular segment rather than the whole market which

in return gives increased profit.

3. Increases Competitiveness
When the focus and the target market is clearly identified to the

marketers and the business team, then comes the

competitiveness. As the target market is known to the business,

the competition in the market will increase and the marketing

team will come up with new innovative ideas to promote their

brand better to stand out among the competitors. Different

offers and discounts will help the marketing team to attract

more consumers and knowing your consumers better will help

gain brand loyalty.

4. Retention of Customer
Retaining customers is very crucial for the business and market

segmentation helps in customer retention. Once the business

knows the consumers, their needs can be catered well and the

customer’s experience with the market brand will help to

connect with the product/service like the hospitality sectors.

Consumers mostly prefer the products/services they have

experienced especially in the cases of airlines and hospitals.

5. Creates and Provides Market Opportunities

Market segmentation helps to identify and recognize potential

market opportunities. The market segments where the

consumers are less satisfied with the other brands are the

opportunity areas for the company to focus and to establish

their brand. The companies can work in these segments and

provide a better product to the consumers than the already

existing ones in the market and earn the consumer’s loyalty.

Thus, market segmentation gives excellent market

opportunities.
6. Effective Market Campaigning
As the business knows the consumers and their needs, the

marketing team can customize or personalize their marketing

campaign accordingly and organize their strategies as per the

need of the market which is directly proportional to the success

of the business.

7. Wise and Efficient Use of Resources

Market segmentation helps to save unnecessary time and effort

engaged in the marketing campaign by identifying the potential

areas of the market. Thus it helps to use the company resources

and money in a more streamlined and efficient manner.

8. Higher Customer Satisfaction

Market segmentation directs or guides the company to make its

marketing efforts consumer and market-oriented in a specific

market segment, and lets the companies serve the consumers

better, increasing customer satisfaction which is the ultimate

goal of the business.

9. Cost-Efficient
Efficient market research and market segmentation help to save

a lot of useful time, money, and resources invested in the

marketing campaign. Also as the customers are grouped as per

their needs, commonalities, choices, statuses, etc. it becomes

easy to target the audience for the marketers. Thus through

market segmentation, the campaign management process is

conducted very smoothly and efficiently in a cost-effective

manner.

10. Know your Customer Better

Market segmentation helps to study the market needs and

potential consumer which reduces the risk of loss or

unsuccessful marketing campaigns. As the market research is

done in advance before the campaign the chances of being

successful are much more as the segmentation of the market

helps the marketers to do their homework for marketing. The

marketers can strategize and plan their campaigns as per the

generic needs of the potential consumers as per the market

research.

Limitations of Market
Segmentation

1. Limited Production:
In each specific segment, customers are limited. So, it is
not possible to produce products in mass scale for every
segment. Therefore, company cannot take advantages of
mass scale production; scale of economy is not possible.
Product may be costly and affect adversely to the sales.
2. Expensive Production:
Market segmentation is expensive in both production
and marketing. In order to satisfy different
groups/segments of buyers, producers have to produce
products of various models, colors, sizes, etc., that result
into more production costs. In the same way, the
producers are required to maintain large inventory for
different styles, colors, and sizes of products.
3. Expensive Marketing:
Market segmentation also results into expensive
marketing. Due to different groups of buyers, the
marketer has to consider all the segments in terms of
needs, interests, habits, preferences and attitudes.
Marketer has to formulate and implement several
marketing strategies for different segments.
4. Difficulty in Distribution:
Company needs to make the separate arrangement for
each of the products demanded by different classes of
customers. Salesman’s recruitments, selection, training,
payments, and incentives are more difficult and costly.
Company has to maintain separate channels and services
for satisfying varied customer groups.
5. Heavy Investment:
Market segmentation leads to heavy investment. In order
to satisfy different needs and wants of various groups, a
company has to produce variety of product lines and
product items. For the purpose, the company requires to
invest more on technology and other inputs that may
demand heavy investment.
6. Promotion Problems:
Market segmentation also creates promotional problems
and multiplies promotional difficulties. It is obvious that
different segments are made on the basis of
distinguished characteristics of buyers. Each group
differs in terms of advertising media, appeal or message.
In order to influence various segments of buyers, the
company is required to prepare a separate advertising
programme or strategy. Similarly, personal selling and
sales promotional activities become more complex.
Company needs to spend more to take benefits of
specialization.
7. Stock and Storage Problems:
To meet needs and wants of different consumer groups,
the company must maintain adequate stock of various
products on a continuous basis. This creates problem of
stocks, storage, and working capital. Most limitations
reflect the impact of situation and inability of manager to
segment the market purposively and meaningfully. But,
limitations cannot restrict segmentation philosophy and
practice. These limitations can be overcome by
segmenting market carefully and objectively.

Market Segmentation Process

1. Target Audience / Market and The Size of The

Market
Identifying the market and the target audience is the foundation for

any marketing campaign. It helps the marketers study the type of

consumers included in the target audience section and set

expectations according to their needs. It helps organize and plan their

marketing strategies as per the size of the target audience’s market

and taste.
2. Set Expectations for the Targeted Audience
Once the target audience and size of the targeted audience are

identified, it is necessary to review the needs and requirements of the

consumers to meet the demands and expectations of the consumers.

3. Distinguish the Categories and The Subcategories of

Products
Based on the demographic factors of classification of the consumers, it

is necessary for the marketers to subcategorize the products so that

the products fit in the requirements for different age groups, different

gender and so on.

4. Study or Research the Needs and Behavior of the

Targeted Consumers
The marketing team must review the needs and preferences of the

consumers from each section of society. It will also be easy to come up

with a generic marketing strategy if the requirements of the

consumers are studied and reviewed carefully.

5. Strategize the Marketing Campaign
Once the market research of all the necessary factors has been done,

and the marketers have accumulated the consumer interest and their

behavior, the marketing team, is all set to strategize their campaign for

a particular product or service. Different advertisements and

promotions, banners, etc., are included to promote the product or the

service. The promotion should be done in such a way that it

establishes a connection between the consumer and the product or

the service as the connection is very important for the success of the

campaign.

Market segmentation has been the cornerstone for all the suc