Meaning

Market segmentation is a process that consists of sectioning the target market into smaller groups that share similar characteristics, such as age, income, personality traits, behavior, interests, needs or location. 

Requirement of Effective Segmentation

Effective segmentation is crucial for businesses to understand and target different customer groups more accurately. Here are some requirements for effective segmentation:

  1. Measurable: Segments should be identifiable and measurable so that businesses can quantify the size, purchasing power, and characteristics of each segment. This allows for better allocation of resources and targeted marketing efforts.
  2. Accessible: Segments should be accessible through channels where businesses can effectively reach and communicate with them. If a segment is not reachable through available channels, it becomes challenging to target them effectively.
  3. Substantial: Segments should be substantial enough to warrant separate marketing strategies and efforts. Small, niche segments may not justify the resources required for targeting unless they offer significant value or growth potential.
  4. Differentiable: Segments should be distinct from one another in terms of their needs, preferences, behaviors, or demographics. If segments overlap significantly, it becomes challenging to develop targeted marketing strategies that resonate with each group.
  5. Actionable: Segments should be actionable, meaning businesses should be able to develop and implement marketing strategies tailored to each segment’s needs and preferences. If businesses cannot take specific actions to address the needs of a segment, segmentation becomes less useful.
  6. Relevant: Segments should be relevant to the business’s objectives and marketing goals. Focusing on segments that align with the business’s value proposition and core competencies ensures that resources are allocated efficiently and effectively.
  7. Dynamic: Segmentation should be dynamic and adaptable to changes in the market environment, consumer behavior, and business goals. Regularly revisiting and updating segmentation strategies allows businesses to stay responsive to evolving market trends and customer needs.
  8. Profitable: Segments should be profitable, meaning they should offer sufficient revenue and profitability potential to justify the resources invested in targeting them. Businesses should prioritize segments that contribute the most to their bottom line and long-term growth.

By meeting these requirements, businesses can develop segmentation strategies that help them better understand their customers, tailor their marketing efforts, improve customer satisfaction, and ultimately drive growth and profitability.

Bases for Consumer and Business Market Segmentation1

Consumer and business market segmentation are based on different criteria due to the distinct nature of their target audiences and purchasing behaviors. Here are some common bases for segmentation in both consumer and business markets:

Consumer Market Segmentation:

  1. Demographic Segmentation:
  • Segmentation based on demographic variables such as age, gender, income, education, occupation, marital status, and family size. Demographic segmentation helps businesses understand the basic characteristics and needs of different consumer groups.

2. Geographic Segmentation:

  • Segmentation based on geographic variables such as location, region, climate, urban/rural areas, and population density. Geographic segmentation helps businesses tailor their marketing strategies to local preferences, cultures, and market conditions.

3. Psychographic Segmentation:

  • Segmentation based on psychographic variables such as lifestyle, personality, values, attitudes, interests, and behaviors. Psychographic segmentation provides insights into consumers’ motivations, preferences, and buying habits, allowing businesses to create more targeted and personalized marketing messages.

4. Behavioral Segmentation:

  • Segmentation based on consumers’ purchasing behavior, usage patterns, brand loyalty, buying occasions, and benefits sought. Behavioral segmentation helps businesses identify different customer segments based on how they interact with products or services and their response to marketing stimuli.

5. Segmentation by Benefits Sought:

  • Segmentation based on the specific benefits or solutions that consumers are seeking from a product or service. This approach focuses on understanding the unique needs and preferences of different customer segments and tailoring offerings to meet those needs effectively.

Business Market Segmentation:

  1. Industry Segmentation:
  • Segmentation based on the industry or sector in which businesses operate. Different industries have unique needs, challenges, and purchasing behaviors, making industry segmentation essential for businesses selling B2B products or services.

2. Company Size:

  • Segmentation based on the size of businesses, such as small and medium-sized enterprises (SMEs) versus large corporations. Company size influences purchasing power, decision-making processes, and resource constraints, making it a critical segmentation variable for B2B marketers.

3. Geographic Segmentation:

  • Similar to consumer markets, geographic segmentation can be relevant in business markets, especially for businesses with location-specific needs or preferences. It involves segmenting markets based on geographic variables such as location, region, or market concentration.

4. Customer Behavior:

  • Segmentation based on businesses’ purchasing behavior, buying patterns, usage requirements, and decision-making processes. Understanding how businesses buy products or services, their motivations, and preferences helps B2B marketers tailor their offerings and marketing strategies effectively.

5. Customer Needs or Solutions:

  • Segmentation based on the specific needs, challenges, or solutions that businesses are seeking. B2B marketers segment markets based on the specific benefits or outcomes that businesses are looking to achieve, enabling them to position their offerings as solutions to those needs.

6. Purchase Criteria:

  • Segmentation based on the criteria businesses use to evaluate and make purchase decisions, such as price, quality, reliability, technical specifications, service, and support. Understanding the factors that influence purchase decisions helps B2B marketers tailor their value propositions and messaging to resonate with different customer segments.

By leveraging these bases for segmentation, both consumer and business marketers can better understand their target audiences, tailor their marketing strategies, and create more personalized and relevant offerings to meet the diverse needs and preferences of their customers.

Market Targetting

Market targeting, also known as target marketing, is the process of identifying and selecting specific segments of the market to focus your marketing efforts on. Rather than trying to appeal to the entire market, target marketing involves concentrating resources on those segments that are most likely to be interested in your product or service. Here’s how market targeting is typically carried out:

  1. Segmentation:
  • The first step in market targeting is segmentation, where the market is divided into distinct groups of consumers or businesses based on shared characteristics such as demographics, psychographics, behaviors, or needs. This segmentation helps identify the different customer segments that exist within the broader market.

2. Evaluation of Segments:

  • Once segments are identified, they are evaluated based on criteria such as size, growth potential, profitability, accessibility, and compatibility with the organization’s capabilities and objectives. This evaluation helps prioritize segments and determine which ones offer the greatest opportunity for success.

3. Selection of Target Segments:

  • After evaluating segments, the organization selects one or more target segments to focus its marketing efforts on. These target segments are those that align most closely with the organization’s strategic goals and have the greatest potential for generating revenue and profitability.

4. Positioning Strategy:

  • Once target segments are chosen, the organization develops a positioning strategy to differentiate its offerings and create a distinct and desirable image in the minds of consumers or businesses within those segments. This involves identifying the unique value proposition that the organization offers to its target segments and communicating this effectively through marketing messages and branding.

5. Development of Marketing Mix:

  • With target segments and positioning in mind, the organization develops its marketing mix, including product/service offerings, pricing strategies, distribution channels, and promotional activities. The marketing mix is tailored to meet the specific needs and preferences of the selected target segments and to effectively communicate the organization’s value proposition.

6. Implementation and Monitoring:

  • Once the marketing strategy is developed, it is implemented through various marketing channels and tactics. Throughout the implementation process, the organization continuously monitors and evaluates the effectiveness of its targeting and positioning strategies, making adjustments as needed based on market feedback and changing conditions.

By focusing its resources and efforts on specific target segments, market targeting allows organizations to maximize the impact of their marketing efforts, increase efficiency, and better meet the needs of their most valuable customers. It also enables organizations to differentiate themselves from competitors and build stronger relationships with their target market.

Niche Marketing

Niche marketing is a strategy where businesses focus their marketing efforts and resources on a specific segment of the market that has unique and specialized needs or preferences. Rather than targeting the broad market, niche marketing involves identifying a narrow and distinct segment of consumers or businesses and tailoring products, services, and marketing messages specifically to meet their needs. Here are key elements and strategies involved in niche marketing:

  1. Identifying the Niche:
  • The first step in niche marketing is identifying a specialized segment of the market that has unmet needs or is underserved by existing offerings. This may involve conducting market research to understand the demographics, psychographics, behaviors, and preferences of the target niche.

2. Understanding Niche Needs:

  • Once the niche is identified, businesses need to deeply understand the needs, challenges, and pain points of the niche audience. This involves gaining insights into their specific preferences, problems, and aspirations to develop offerings that resonate with them.

3. Developing Specialized Offerings:

  • Niche marketing involves developing products, services, or solutions that are tailored to meet the unique needs and preferences of the niche audience. These offerings are often highly specialized, differentiated, and may address niche-specific problems or requirements that mainstream products do not address.

4. Positioning and Differentiation:

  • Effective niche marketing requires clear positioning and differentiation to stand out in the marketplace. Businesses need to communicate their unique value proposition and how their offerings are superior to competitors within the niche. This may involve emphasizing factors such as quality, innovation, customization, or expertise.

5. Targeted Marketing Messages:

  • Niche marketing involves crafting targeted marketing messages and communications that resonate with the niche audience. This includes using language, imagery, and content that speaks directly to the needs, preferences, and interests of the niche, rather than taking a one-size-fits-all approach.

6. Selecting Marketing Channels:

  • Businesses must choose the most effective marketing channels to reach their niche audience. This may include niche-specific publications, online forums, social media groups, industry events, or targeted advertising platforms that are frequented by the niche audience.

7. Building Relationships and Community:

  • Niche marketing often involves building strong relationships and a sense of community with the target audience. This may include engaging in conversations, providing valuable content and resources, offering personalized support, and fostering a sense of belonging among niche customers.

8. Continuous Innovation and Adaptation:

  • Successful niche marketing requires ongoing innovation and adaptation to remain relevant and competitive in the market. Businesses must stay attuned to changing needs and trends within the niche and be willing to evolve their offerings and strategies accordingly.

Niche marketing can be highly effective for businesses looking to differentiate themselves, maximize their impact with limited resources, and build strong connections with a loyal customer base. By focusing on a specific niche, businesses can position themselves as experts in their field, drive customer loyalty, and achieve sustainable growth.


  1. Check out other notes on marketing:
    Unit -1 Introduction To Marketing
    Unit-2 Marketing Analysis
    Unit-3 Market Segmentation
    Unit-4 Products, Services and Brands
    Unit -5 Pricing
    Unit-6 Distribution Channel and Logistics
    Unit-7 Promotion

    Click here to see the examination questions.
    Click here to see the solution. ↩︎
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