Market Segmentation: its objective, Importance, Merits and Demerits

The market of any product or service is made up of several segments. A group of customers who share a similar set of need make a segment. Under segmentation marketer divides the broad market into subset of consumers who have common need and priorities.

Objectives of Market Segmentation

  • To identify the taste and buying motive of the target consumers
  • Grouping of customers on the basis of their common characteristics such as behaviour, income, age, geography etc.
  • To make Consumer oriented approach for the firm
  • To define marketing strategies, targets and goals of the firm.

Importance of Market Segmentation

  • To understand Customers
  • To maximize product potential
  • To improve distribution network
  • To gain new clients

Basis of Market Segmentation

  1. Geographic Segmentation ( Climate zone, Region, State, District, Rural Area)
  2. Demographic Segmentation ( Age, Sex, Family size, Religion, Community , Language, Occupation , Income, Education level, Social status, Generation)
  3. Psychological Segmentation ( Personality traits, Attitudes, Lifestyle , Value)
  4. Behavioural Segmentation ( Brand loyalty, Consumer status, Usage rate, readiness to purchase)

Merits of Market Segmentation

  • Increase the focus of a firm
  • Increase in competitiveness
  • Market expansion
  • Customer retention
  • Increase in brand loyalty
  • Profitability increase
  • Better Communication

Demerits of Market Segmentation

  • Too small Segments
  • Misinterpretation of consumers
  • Higher stock holding costs
  • Increase in cost due to variations of the product