Market segmentation is a marketing concept which divides the complete market setup into smaller subsets comprising of consumers with a similar taste, demand and preference.
Following are the steps of Segmentation:-
1 – Define the market
  • The first step in creating market segments is to clearly define the market of interest.
  • For instance, for a firm that operates a chain of bookstores, it would be too top-level to define the market as all retailing consumers, as it is unlikely to lead to any meaningful segmentation. We need to split out the overall broad market into its various sub-markets.
2 – Create market segments
  • Now that we have defined the market clearly, we need to determine what types of different consumers form that overall market. To do this, we need to review the list of segmentation variables and choose two or three of those variables that we think affect the purchasing behaviour of consumers.
3 – Evaluate the proposed market segments
  • After this, we may evaluate them to ensure that they are useable and logical. To do this, we need to quickly assess the segments against a checklist of factors.
4 – Construct segment profiles
  • We may be required to describe the segments. The following is a checklist of factors.
  • For example, Key measures, Consumer Behaviour, Description, Competition/ Communication, etc.
5 – Evaluate the attractiveness
  • If we are required to select one target market from our list of market segments, we need to use some form of objective assessment like –
    1. Financial Issues
    2. Segment size
    3. Segment growth rate
    4. Profit margins
    5. Competitors
    6. Distribution channels
    7. Strategic Direction
    8. Marketing Expertise
    9. Resources
    10. Capability
    11. Branding
6– Select target markets
  • Using this, we can select the most appropriate target market for the firm. We should take into account: the firm’s strategy, the attractiveness of the segment, the competitive rivalry of the segment, and the firm’s ability to successfully compete.



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