Question

What is Market Segment? How do marketers segment the market? How are the segmentation schemes evaluated?

Answer 1

Market Segment: A market segment is a group of people who share one or more common characteristics, lumped together for marketing purposes. The segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar interests, needs, or locations. Each market segment is unique, and marketers use various criteria to create a target market for their product or service.

Marketers Segment the market based on following 4 types:

-Behaviour

-Demographics

-Geography

-Pschographics

By Behavior	By Demographics	By Geography	By Psychographics
Benefits sought from the product How often the product is used (usage rate) Usage situation (daily use, holiday use, etc.) Buyer’s status and loyalty to product (nonuser, potential user, first-time users, regular user)	Age/generation Income Gender Family life cycle Ethnicity Family size Occupation Education Nationality Religion Social class	Region (continent, country, state, neighborhood) Size of city or town Population density Climate	Activities Interests Opinions Values Attitudes Lifestyles

Evaluation of Segmentation Schemes:

Does the segmentation scheme have:

1.Data to identify segments? Any of the following methods could be used:

   - Census data: It may be available but may not be useful in all the cases

   - Vals & Prizm: An expensive way

   - Specific survey: It may not be available for the desired survey.

2.Databases to access segments: Databases that give access to the specific people within your chosen segments should be evaluated

3. Profitability

Size matters but so does frequency & depth ($) of purchase, price sensitivity, segment stability, growth potential, competitive intensity, etc. Hence use information to estimate segment value.

One needs to be careful not to segment too narrowly. For that it needs to be determined what matters to the product and what is the cost of reaching the segment?

4. The segmentation should be such that it fit with corporate goals. A company needs to consider its corporate goals and image while evaluating segmentation schemes.

5. The segmentation scheme should be Actionable. Marketer should be able to design something for segment. It is common to link usage, attitudinal, etc. variables to demographic variables to make the segment more actionable