Requisites of Effective Market Segmentation

Market segmentation is a complex decision and requires due care while selecting the criteria on which decisions are to be taken. Products and services need to be planned for a particular market. The product being launched should attract the market segment. It should have substantial size and growth potential alongwith the capacity to provide remarkable returns. The market segmentation criteria are discussed below:

Requisites of Effective Market Segmentation

Effective market segmentation usually has the following requirements:

• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable

1) Measurable: The size and purchasing power and disposable income of the segment can be measured. The measurement of a segment’s size, purchasing power, and disposable income is important in determining its potential profitability. This information can be obtained through different market research methods, such as surveys and data analysis. Some automobile buyers want high-performance, status, stylish, and luxury model cars but it is important to measure and know the size of such buyers. It is essential that sufficient data or information in terms of customer purchase behaviour and the size of the market so that a new segment can be a business opportunity.

While establishing a market segment, the consumers of the product are counted along with their financial status and characteristics. The number of such consumers should be enough to be measured with ease. These calculations are obtained only after the marketing analysis and research work is done.

2) Substantial: It is the degree to which the proposed segments are large from consumer demand and profitable to the marketer, for considering a separate marketing plan and programme. 

The market segment must have customers of similar characteristics like age group, financial status, and culture and should be aware of the different brands of the product. The size of the segment should be substantial so that a suitable marketing strategy can be adapted which is convenient to all. The products should be supplied as per consumer preferences quantity-wise, i.e., in small or big packs.

3) Accessible: It is the degree to which the proposed segment can be effectively reached and served. Whether the distribution system and the promotion can effectively reach them.

The product and market segment should be compatible in price and financial status of the population. The location of the segment should have easy transportation facilities for the smooth flow of the product. The marketing strategy adopted for one consumer group is always different from another consumer group due to differences in their needs. For example, fashion needs may vary based on age groups therefore each group requires different products respectively. The effectiveness of marketing lies in catering to the real needs of customers belonging to different segments.

4) Differentiable: Each segment of the market should be different from others in terms of its needs and wants. Each segment requires different marketing strategies because it responds differently to different strategies. A motorcycle manufacturer can segment the market based on the usage of the product. People buying cars for fuel efficiency are different from people buying them for style and both need different marketing strategies.

The marketing managers should differentiate between the different segments since each segment requires a different strategy for marketing. Consumers react differently to different products, and the advertisements are also designed by consumers of different locations. Various marketing tools are used to take due care of nuances of the local area to attract customers. 

5) Actionable: A segmentation variable should help marketers develop effective marketing programs to attract and serve potential customers effectively.

Well-defined market segmentation is always actionable on the part of the consumers, who are captivated by the products, services, advertisements and marketing strategies and as a result, indulge in purchasing activity. The product placed at a reasonable price coupled with marketing efforts is bound to bring favourable returns.