Market Segmentation involves the process of dividing a broad consumer base or business market, normally consisting of existing and potential customers, into sub-groups or segments of consumers based on some type of shared characteristics. The segments thus created are composed of consumers who will respond similarly to marketing strategies and who share common traits such as similar interests, needs, demands, preferences or locations.
Market Segmentation can primarily be understood as the necessary research that determines how an organization can divide its customers or cohort into smaller groups based on characteristics such as, age, income, personality traits or behavior. Market Segmentation is significantly crucial for targeting the products, sales and marketing strategies to the right customer group. Market Segmentation is thus the sub-division of customers into homogenous sub-set of customers where any sub-set may be selected as market target to be reached with distinct Marketing mix. Simply put, Market Segmentation is the process of breaking of buyers into groups that are different from each other but internally similar.
Market Segmentation is applicable to any marketing situation: Business to Business, Business to Consumer, not-for-profit, and politics.

Segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior. The world is made up of billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'.

Requirements of Market Segments In addition to having different needs, for segments to be beneficial they should be evaluated against the following criteria:

• Identifiable: The differentiating attributes of the segments must be measurable so that they can be identified.
• Accessible: The segments must be reachable through communication and distribution.
• Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important, especially for demographic and geographic variables. For an organization with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behavior (frequency, volume, product groups, mode of payment etc.).
• Substantial: The segments should be sufficiently large to justify the resources required to target them.
• Unique needs: To justify separate offerings, the segments must respond differently to the different marketing mixes.
• Durable: The segments should be relatively stable to minimize the cost of frequent changes.

Segmentation fits with other business activity Segmentation has great impact on strategy and tactical development.

• Strategy - Target market(s) - Offering strategy
• Offering - Product line - Associated service bundle
• Marketing tactics - Advertising and other communication (message and media) - Distribution channels - Pricing - Salesforce allocation - Promotion

Important Attributes for Market Segmentation

• Age
• Gender
• Geographic location
• Income
• Spending patterns
• Cultural background
• Demographics
• Marital status
• Education
• Language
• Mobility

Bases of Market Segmentation Four commonly used bases for segmentation. These four relate to potential markets.

• Descriptive - Geographic Location: Based upon where people live (historically a popular way of dividing markets) - Demographics: Based on age, gender and income level (very often used)
• Behavioral - Psychographic / lifestyle: Based on people's opinions, interests and lifestyles. Eg: People who like hard rock music probably prefers beer to wine. - Benefits: Based on the different expectation that customers have about what a product/service can do for them. Eg: People who want to but "lite" food cause it will help them lose weight.

Geographic Segmentation: The study of geographic segmentation is important because where people live has a big effect on their consumption patterns. Additionally, where people live in a city is also a reflection of their income level and can make certain assumptions about their ability to spend. This helps people plan store locations and the location of other services. Primary attributes for Geographic Segmentation are:

• Country
• Region
• Urban/Suburban/Rural
• Population density
• City size
• Climate

Demographic Segmentation: Demographic Segmentation is the most common approach to market segmentation.

• Gender
• Age
• Familiar life cycle
• Race/Ethnic group
• Education
• Income
• Occupation
• Family size
• Religion
• Home ownership

Gender is an obvious way to divide the market into segments since so many products are gender-specific.
Age is another obvious way to divide the market into segments since so many products are based upon "time of life".
Segmenting by the "stages in the family life cycle". There are different buying characteristics of people of different ages in a family. Household (family - style) size: Buying patterns: Segmenting markets on the basis of income and expenditure patterns. Income is possibly the most common basis for segmentation.
Psychographic Segmentation "The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers." Psychographic profiles of a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions. AIO - Activities, Interests, and Opinions.

• Lifestyles
• Psychological variables - Personality - Self - image

Benefit Segmentation Expected benefits from the product use on the basis of occasions, product usage, benefits sought, brand loyalty. Occasions 1. Y2K Cruises 2. Hallmark Cards 3. A greeting card for every occasion - Valentine's Day Card, Christmas Card

Choose the correct answer to the following questions.
1. ____________ is useful for targeting existing customers A. Market targeting B. Market segmentation C. Market positioning D. All of these E. None of these Solution: B
2. ___________ is a set of buyers sharing common needs that company decides to serve. A. Target group B. Demographic group C. Behavioral group D. Psychographic group E. None of these Solution: A
3. _____________ is for identifying the difference in behavior that have implications for marketing. A. Purpose of positioning B. Purpose of targeting C. Purpose of segmentation D. Purpose of repositioning E. None of these Solution: C
4. Differentiable, substantial, actionable, measurable are requirement for ____________. A. Effective marketing B. Effective segmentation C. Effective repositioning D. Effective targeting E. Effective positioning Solution: B
5. Who stated that “Market segmentation is subdividing of the market into homogeneous subsets of customers where any subset may conceivably be selected on a market target to be reached with a different Marketing Mix”? A. Philip Kotler B. Stephen Morse C. Kenneth D. Neilsen E. Lorie and Robert Solution: A
6. The segmentation of market-based on the gender of the customer is A. Geographical B. Psychographic C. Demographic D. Behavioral E. None of these Solution: C
7. DAMP means A. Direct Accessible Market and Profitable B. Demographic Accessible Measurable and Profitable C. Discernible Accessible Market and Profitable D. Differentiated Accessible Measurable and Profitable E. Discernible Accessible Measurable and Profitable Solution: E
8. What is MKIS? A. Managing Information System B. Marketing Inter-office System C. Managing Inter-office System D. Marketing Information System E. None of these Solution: D
9. In marketing segmentation technique customers using the product are divided into several homogeneous groups on the basis of their ____________. A. Economic condition B. Physical condition C. Common characteristics D. Place they live E. Gender Solution: C
10. ___________ is a market coverage strategy where a company decides to target one market segment with a single Marketing Mix. A. Traditional marketing B. Focused marketing C. Mass marketing D. Segment marketing E. Micro marketing Solution: B