What is a market segment?

Answer 1

Market segmentation is used to build a model of a market to both optimize product development and optimize marketing messages. Customers within a market are divided into groups known as segments. A segment is formed where customers would derive similar benefit from the product, because they share similar attitudes and behaviours. Customers in another segment can use the same product but will derive disimilar benefits. Having created a model the value of each segment can be assessed. This evaluation can be used in setting priority for product features and performances with the most lucrative segments addressed first. Identifying segments that are currently not served, or not well served, is also a way of establishing opportunity. This can be used in particular to find ways of breaking into a market. Other segmentation methods have been described. Many are aimed at adding clarity to the market model by putting similar customer benefit into a market context. For example grouping business customers by their type of business. Care should always be taken to not segment according to your own strengths and weaknesses which is a common error. There is one other fundamentally different way of segmenting a market based upon access to the customer. Here customers buying through particular channels or in particular geographic areas are combined into segments. This analyses both the market and your ability to access the market so it should be used with care as poor access can be misinterpreted as a poor market or vice versa. The usefulness of this kind of segmentation is to identify your accessible market and how best to grow it.