Market Segmentation : How to use it to your advantage in business?

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“Market Segmentation is a natural result of the vast differences among people.” – Donald Norman

Let us begin with an example, imagine you were hired in a company as a sales executive. And the only thing that your employer has mentioned to you is that you must do sales. Wouldn’t there be a hundred questions in your mind, like sales of what? where? to whom? etc. Because if you are not clear with the answers to these questions, the word ‘sales’ would be a very generic term for you. You will have absolutely no idea on how to go about with it, which will affect your performance in your company.

The companies face the same difficulty. The ones who have nailed the strategy gets to be on the throne, rest kneel. So how is it that the successful companies remain successful? It is simply because they understand their customers and their market well. They do not find customers for their products; they find products for their customers. Hence, to aid this, one of the best techniques that they use is segmenting the market and knowing whom they must sell and what they must sell. And this is Market Segmentation.

According to Philip Kotler, it is “The sub-dividing of the market into homogeneous sub sections of customers, where any sub section may conceivably be selected as a market target to be reached with a distinct marketing mix.” In simple words, it is all about grouping your customers into different subsets based on their likes, dislikes, demands and preferences.

Market segmentation, thus, have many benefits to the budding as well as ongoing businesses. Let us see how to use market segmentation to your advantage.

Aids Product Development

If a business focuses on specific market segment, it will allow it to customize its existing services and products to meet the exact needs of their targeted customers. It also aids the business to design and develop future products and services to fit the specific requirements of the market. In this way companies will get to know what is working well for them and what is not in terms of their offerings. This will thus, encourage the companies to meet the market needs efficiently.

Opportunity to enter a new market

Market segmentation opens the door for a company to enter into a new market. It identifies new opportunities and enable them to understand the niche of the market. If for instance, there is an undeserved market, the company can offer the required product and can easily penetrate that market and hold the first position. Business that first offer the product or service that the market needs tend to control the market even when the competitors seep in. For example, a laundry service company offers its services to a college campus where the students do not have any facility, stands a good chance of remaining a go-to laundry service for the students of that campus.

Streamlined focus of the business

One of the key advantages of market segmentation is that it encourages businesses to streamline their focus to specific products or services as needed by the market. Because if it tries to serve too many markets with too many products or services, it might dilute the brand. For example, if a coffee shop serves full course meal, will fail to capture any single market, and will lose its ability to differentiate itself from restaurants or cafes. The cafe that serves only hot and cold beverages will attract a market segment that seeks a specific product allowing the business to improve its core competencies.

Helps in Product Pricing

It is necessary for companies to adopt different product pricing for different markets considering the price sensitivity of the customers in each market. By making the use of market segmentation, it will help business to identify the price of their product or service in such a way that it suits all type of income group to target new customers in various markets. However, on the other side, if a company wants to keep its product or service niche to say like a high-income group, it may keep the pricing high to make their products exclusive. This helps them ensure that their offerings are neither overpriced nor under-priced.

Helps in streamlined distribution

Another major benefit of market segmentation for businesses is to identify optimum distribution strategies for new products or services. For example, it will help them to know what the best channel of distribution would be and in what kind of stores will their product be noticed and sold. A band-aid is best noticed and sold at a medical shop rather than a generic home need store.

Better service to customers

Market segmentation helps the companies to serve their customers better. It will exactly know what the customers need and can offer products or services accordingly. Thus, enabling the companies to concentrate its marketing and distribution efforts in a specific market area, thereby giving complete customer satisfaction. And once the customers are delighted and satisfied it will help the company to retain them and leading to company’s profitability.

Right Product at the Right time

Through segmentation, a company can decide on what product to offer at what time and area. It makes it easier for them to understand the requirement of the customer at that time. For example, a clothing company will stock up all the warm clothes for winter season whereas cotton and loose clothing in the summers for those regions that face extreme temperatures. This way, it will not only help the company to fulfil customers’ needs but will also able to reduce cost by having less of dead stock and more of moving products.


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