Process of Market Segmentation | Market Segmentation Definitions

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Process of Market Segmentation | Market Segmentation Definitions



Process of Market Segmentation

Market segmentation is achieved on a four-stage process:

Step I: Segment identification

The first step in the segmentation process is to identify the market segments for the product. The market segment is identified by the survey, analysis, and profiling. The survey is conducted to collect the data related to the need of the market and to study the characteristics of the market. In a survey, demographic features, psychological, behavioral, and geographical features are studied. The information collected through the market survey is analyzed and the factors affecting product demand are categorized into various factors. All analyzed data are profiled according to their similarity and market segments are identified.

Step Il: Segment Evaluation

The segment identified should be evaluated from several aspects. Generally, the segment identified is evaluated on three basic criteria. They are:
  • Segment size and growth
  • Segment structural attractiveness
  • Organizational objective and resources

Segment size should be in correspondence to organizational size with high growing sales volume. Segment structural attractiveness should be evaluated according to the characters of segment rivalry, new entrants, substitute products, buying power of customers, and bargaining power of suppliers. Besides, these organizational objectives and resources should be evaluated. Organizational objectives and resources should be balanced with segments. 


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Step Ill: Analysis of Market Segment

After evaluating the market segment, the segment attractiveness from the point of size and growth are analyzed. Analysis of total demand, market share of competitors, competitor’s strengths and weaknesses, organizational resources, and the marketing mix are analyzed. Analysis of market segment involves following aspects:
  • Government policies and laws
  • Calculation of probable total demand for the product segment.
  • The market share of the competitor and the firm.
  • The relative strength of the competitors in relation to product-service offers, quality, price, customer loyalty, distribution networks, etc.
  • The organization’s resources to meet the challenges in the market segment.
  • Possible marketing mix alternatives to be implemented in the segment.

Step IV: Segment Selection

After proper and careful evaluation, the organization needs to select one or more possible segments. The selected segments are the target market. Target markets are selected after several segment’s evaluation and analysis. Various factors like segment attractiveness, organizational objectives and resources, government policies and laws, social responsibility, desired market share, and coverage, etc. should be evaluated and analyzed. The best market segment should be selected after the evaluation and analysis of the segment. The marketers can enter and service a number of market segments like single segment coverage, multi-segment coverage, product specialization, market specialization, full market coverage, and niche market.


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