Discuss User for MBA

Posted on

About market segmentation

What is market segmentation and when does the entrepreneur/marketer use it?

This post was part of TyroCity discussion forum
Question asked by aditi_paudyal

Top comments (1)

sushant profile image

Market segmentation is a strategy of partitioning a market into submarkets or segments which is likely to show similar response to the market inputs. The market as a whole might be too broader an area to focus on and offer one’s product and service. So, market segmentation helps a company to study the market into smaller units, based on different features, so that the entrepreneur can determine, which segment might find the product or services of the company as relevant. This market can be subdivided into features like geography, demography, psychology, psycho-graphics and behavioral variables. This market segmentation is useful step in getting information about the lucrative target market, which the company needs to focus on.

Entrepreneurs or marketers use the market segmentation at the initial phase of business for determining a target market where they can develop an effective marketing plan. For a company, it is important to understand what values their product or service is offering while which segment of population finds it Interesting. The Company can be segmented into different factors, like geography, psychology etc., which gives a picture about the different market segments.

For example, Paras is selling his avocados to people at large makes him difficult to sale the avocados as he might get order from Pokhara or even New-York city. He had to segment his customers, so he puts a clause to sell avocadoes inside the Kathmandu valley. On the other hand, not all the people inside valley would be interested in his avocados nor he would be able to supply to everyone inside the Kathmandu valley. So, he rethought of segmenting his customers and found the different segment of people interested in buying avocados were: high income earning people, health conscious college students, parents etc. He thought the high income earning people, who wants to order avocados online who are conscious about health and are ready to pay high for good avocados, might be a profitable segment to target on. Hence, he moved on with designing strategies to attract these type of customers. Which helped him save his resources on targeting wrong or profitable segment. Like Paras, one has to start segmenting the market right from the start and has to select the most profitable segment, based on the competence and competitive strength of the company. However, the company has to review the market and pay attention to the shifts to further segment the market to see the emergence of new market segment, where the company can position their product or service.