6.Advanced Techniques of Market Analysis: A Brief Overview of Some Useful Concepts

6.3 Segmentation


Market Segmentation

Market Segmentation is classification of customers into homogenous groups that allow development of efficient product differentiation strategies to exploit these segments.


Effective Market Segmentation

Six segmentation criteria determining the effectiveness and profitability of marketing strategies

1. Identifiability

It must be possible to measure

2. Substantiality

It must be large enough to earn profit

3. Accessibility

It is possible to reach potential customers via the organization’s promotion and distribution channel

4. Stability

It must be stable enough that it does not vanish after some time

5. Responsiveness

It responds consistently to a given market stimulus

6. Actionability

It is useful in deciding on the marketing mix


Market Segmentation:
Classification of Segmentation Bases

General Product-specific
Observable Cultural, geographic,
demographic, and socio-
economic variables
User status, usage,
frequency, store loyalty
and patronage, situations



Psychographic, values,
personality and life-style


benefits, perceptions, elasticities, attributes, preferences, intention


Benefit Segmentation

  • „…The Benefits people seek in products are the basic reasons for the heterogeneity in their choice behavior, and benefits are thus the most relevant basis for segmentation.”

(Haley 1968)


  • „… Benefits are preferred segmentation basis for general understanding of a market and for making decisions about positioning, new product concepts, advertising, and distribution because of their actionability.“

(Wind 1978)


Market Segmentation:
Evaluation of Segmentation Bases

Identifiability Substantiality Accessibility Stability Actionability Respon-siveness
1. General, observable ++ ++ ++ ++
2. Specific, observable
Purchase + ++ + +
Usage + ++ + + +
3. General, unobservable
Personality ± ± ±
Life style ± ± ±
Psychographics ± ± ±
4. Specific, unobservable
Psychographics ± + ++ ±
Perceptions ± + +
Benefits + + + ++ ++
Intentions + + ± ++


Benefit Segmentation Paradox

When segmenting on the basis of the benefits consumers want from a particular product/service category, an analyst should make a clear distinction between basis variables that are important in separating the total sample into homogenous segments and those that are important because they are the benefits or features that the respondents in each segment want most. It is too easy to assume that these are the same. Sometimes they are, but often they are not. The “drivers” may not vary among different segments, i.e., may have no discriminant power at all, e.g., price, quality, etc.

To the table of contents