Market Segmentation

Before getting into ways to segment markets it's important to note that not all subsets of consumers constitute a market segment. There are five questions you should ask to determine if a group of consumers is a viable market segment.

Can you identify and measure the segment?

It's not hard to imagine segmenting consumers by men and women. You can find out how many men and women are, for example, in the state of Minnesota and count them as a segment.

Can you reach your segment through communication channels?

Bodegas, small neighborhood markets, are well known as the preferred place to shop for hispanic consumers. What's challenging, however, is to find a communication strategy that can reach this very fractured distribution channel. Challenging doesn't mean impossible. Creative companies are finding ways to reach out to Bodegas in order to tap into the potentially lucrative hispanic market.

Is your segment large enough that your investment produces a return?

The neighbors on my side of the block might have common characteristics, but is the segment large enough to produce the revenue I need to turn a profit? My children seem to think so when they have a lemonade stand in the summer, but most businesses don't have such low overhead.

Does your segment have distinct needs?

If your segment has common characteristics, like personality or interests for example, but the differences are not distinct enough from the overall consumer group, it might not be worth it to segment them. Should a company treat health concious and weight concious consumers separately? Will these two groups respond differently to changes in the marketing mix? If not then they are one segment - not two.

Is your segment realtively stable?

If the size of  your segment, access, or characteristics of your segment changes too often there may not be enough time for your differentiated efforts to work. Not only do you want time to influence the buying behavior of your segment, you want time to measure your initiatives as well.