A market segmentation analysis provides the fundament for companies to successfully
identify market segments, and is also providing companies with the ability to
evaluate the needs and wants of different market segments. When conducting a market
segmentation analysis, companies will potentially also be able to discover new
segments, market niches and business opportunities, and new ways of positioning
their products to different audiences.
When having analyzed market segments, companies will therefore be able to tailor
their marketing mix to specific customer needs and wants more directly, and
thereby create a stronger presence within specific segments. This approach is
often referred to as market positioning, in which companies are positioning
themselves to satisfy the needs and wants of a homogeneous audience.
The differentiation of the entire market into smaller sub-segments makes the
most sense for companies facing a market audience consisting of big differences
between potential buyers, and for companies facing problems with getting market
attention with one uniform marketing
mix for all customers.
The analysis is all about segmenting the pool of buyers into uniform and homogeneous
segments, with homogeneous needs and wants that are qualitative distinct from
other segments. Likewise, each segment should be durable over time, and big
enough to justify the marketing efforts put into getting their attention.
Below, some variables to consider in a market segmentation analysis are
Marketers should consider if there are some geographical variables that could
have and effect on the needs and wants of differentiated customer segments.
Geographic variables could e.g. consist of:
Population density – Urban, suburban or rural
Type of neighbourhoods
Marketers should also consider the demographic variables like:
When analysing different segments for psychographic variables, marketers could
look at some of the following variables.
Marketers should finally analyze and identify the customers behavioural tendencies like:
Slow or fast adopters of new products
Wanted ways of purchasing
All the variables above are useful when identifying different markets segments,
and may all act as a starting point for evaluating the different needs and wants
By doing this, as said, companies will potentially avoid getting stuck-in-the-middle,
and be able to more effectively develop products and services that fully satisfy
the differentiated needs of a wide and fragmented range of customer needs.
Many companies will however not have the sufficient organizational resources
to cater to all identified segments, and many companies will have to select
one or few segments to attack. In this situation, companies could evaluate its
core competencies, and analyze in which segments these competencies would be
appreciated the most. By doing this, companies may create a much stronger presence
within few selected target segments, and thereby potentially boost customer
loyalty, brand recognition and profits generated in these selected market segments.