Market Segmentation

Market Segmentation, in simple words, means dividing (segmenting) the market (demand) for a product into different classes. Such division in the market is based on the needs and expectations.

The concept can be better understood by taking the example of a product say cloth. Cloth is required by all the people. These people can be divided into two broad classes males and females. Further classification among males and females can be done as (a) children, (b) adolescents, (c.) youth, (d.) middle aged and (e.) aged. The tastes, expectations of each one of these classes are different from those of the others.

A person desiring to set up a cloth shop in a particular area should be able to estimate the strength of each of these classes for successful marketing. Depending on such strength, he will be taking many decisions regarding his stock position, advertising and many other aspects relating to marketing. This means that the cloth shop owner segments the market and optimizes his sales. Imagine a situation where a cloth shop owner stuffs his shop with designer-dresses in an area populated by the poor and the middle class. Needless to say, his sales will be minimal.

"Market segmentation can thus be defined as the process of dividing the total market for a product into different parts (segments) and making use of each segment for the purpose of optimising marketing and sales."

There is no rigid rule regarding the variables based on which the market can be segmented. In the words of Management Expert, Philip Kotler(1967), "Markets consist of buyers and buyers differ in one or more respects." They may differ in their wants, resources, geographical locations, buying attitudes and buying practices. Any of these variables can be used to segment a market.

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