Market Segmentation

Reviewed by Sweta | Updated on Aug 01, 2021



Market segmentation refers to dividing the market into different segments based on the common characteristics displayed by a group. Market segmentation facilitates the adoption of different strategies for each segment and enables meeting the common needs of each segment. It also helps in customising and branding products according to customers' needs.

Understanding Market Segmentation

One of the reasons for market segmentation is to understand the different customer segments, their choices, and pricing power. Segmentation helps in minimising the risk associated with a target market. Segmentation enables marketers to make marketing strategies and decisions.

A segmentation based on different parameters helps companies in differentiating products and services for their customers. Market segmentation can be: - A division into demographic segments, such as gender, age, life-cycle and income. - Geographic classification dealing with different regions or areas. - Behavioural classification based on the benefits of users. - Psychographic segmentation based on lifestyle, personality, and social class.

An organisation carries out market research to assess the potential for a product or service. Market segmentation extends the market research activities by classifying market into segments. Marketing strategies help in delivering goods and services to customer's satisfaction and at an effective cost.

Companies use three primary criteria to classify segments: - The distinction between customer's needs - Homogeneity referring to common choices of customers - Reaction referring to customer response

Examples of market segmentation The TATA group of companies have separate lines of clothing for ethnic and western wear, i.e. Taneira for Sarees and Westside for casual and western wear.


Market segmentation enables a company to effectively plan its marketing activities. Generally, companies carry out field studies to understand the preferences of customers in a target area or segment. The results of the studies help devise suitable marketing strategies.

The activity helps in reducing overall costs in branding and selling a product or service. Segmentation also helps in tapping into one portion, for example, the premium segment in a market, before moving to the mass market segments.

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