What is Market Segmentation? Definition, Meaning, Objectives, Levels & Benefits

The marketing personnel recognize various alternatives to segment the market and create profiles for market segments that have emerged.

Market segmentation is the process in which groups of individuals or organizations that play an important role in determining the marketing strategy are identified. Through segmentation, different markets are classified into smaller and similar submarkets.

Objectives of Market Segmentation

The objectives or purposes behind carrying out market segmentation are as follows,

1. Target Market Selection

On the basis of segmentation, target markets are selected. Target market is the selected market segment, which a company is planning to serve. In a target market, the customers possess same characteristics and a single marketing mix is used for serving them.

2. Tailored Marketing Mix

Segmentation helps in grouping the customers, on the basis of their similarities. Marketers are capable of identifying the detailed requirements of segments and create a marketing mix, which fulfill their needs.

3. Differentiation

A company divides its market into constituent segments so that it can differentiate its products or offerings between segments and from competitors. A company develops a differential strategy over its competitors to attract the customers for and purchasing its products.

4. Opportunities and Threats

Market’s potential increases when the customers are becoming wealthy. They fry to adopt new experiences and develop new values which result in the emergence of new segments. A company can identify those segments which are not served properly by the competitors. In the same way, if a firm ignores an essential market segment, then it may create threat to the company as the competitors can use it for entering into the

Levels of Market Segmentation

The following are the levels of market segmentation,

1. Niche Marketing

A niche are a small group of customers trying to obtain different types of benefits. Marketers recognize niches by classifying a segment into subsegments. Niche markets are small and attract only one or two competitors. The marketers of these markets have complete knowledge about the needs of their customers.

2. Local Marketing

Local marketing is a type of target marketing in which the marketing programs are created according to the needs and wants of local customer groups. It is also called as grass root marketing in which the products or services are promoted by communicating its features and advantages and connecting it with distinct and interesting experiences.

3. Customization

In this level of market segmentation, operationally driven mass customization is integrated with customized marketing for designing products and services according to the needs and wants of the customers.

Benefits of Market Segmentation

The benefits of market segmentation are as follows,

1. As market segmentation is customer driven, it is compatible with the marketing concept. In market segmentation, the needs and wants of the customers in a sub-market are firstly determined and then accordingly a marketing mix is designed for satisfying those wants.
2. Making the use of marketing programs to individual market segments helps the firm to carry out the marketing job effectively and make optimum utilization of its marketing resources.
3. Development of strong positions in specialized market segments helps the medium sized organizations to grow rapidly. For example, Oshkosh Truck Company in Wisconsin had developed strong positions in specialized market segments and has now become the largest producer of fire and rescuer trucks for the airports in the world.
4. Large organizations having sufficient resources to deal in mass marketing and having expensive national advertising campaigns. These organizations adopt market segmentation and consider it as an effective strategy for reaching the fragments.
5. Market segmentation helps the small firms with limited resources to effectively compete in one or two small market segments.
6. If the markets are not segmented then the customers become frustrated as they have to make complex decisions for a simple purchase when number of same products are available.