Market segmentation Definition, Objectives, Advantages, Limitations

31st March 2021 2 By indiafreenotes

The term segmentation was first coined by Wendell Smith in 1956. His idea was simple enough split up your customers and treat them differently; you will then be able to present customers with product and services more relevant to their needs. Market segmentation has been defined by Stanton as the process of taking the total heterogeneous market for a product and dividing it into several submarkets or segments, each of which tends to be homogeneous in all significant aspects.

Market segmentation is one of the most interesting and useful tools in marketing management. In modern economics, no company sells its products to individual customer because of mass pro­duction techniques. Goods and services are mass marketed.

But the problem is that the tastes and vents of the consumers vary- region to region, and even from person to person. There is no homogeneity. On the other hand, there is a great deal of diversity in regard to income, consumer psychographics, demography, family life style, social class, and cultural factor.

According to Kotler, market segmentation is the subdividing of market into homogeneous subsections of customers, where any subsection may conceivably be selected as a target market to be reached with a distinct marketing mix.

“Market Segmentation is the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing–mixes. The company identifies different ways to segment the market, develops profi­les of the resulting market segments and evaluates each segments’ attracti­veness.” [According to Philip Kolter].



Market segmentation lets you decide how to offer a product or service to each group of consumers for maximum convenience, so you can tailor your sales channels to the preferences of the members of each market segment. Someone who can afford your product and wants to buy it will make the purchase if it is convenient. A market segment made up of seniors may prefer direct in-home sales; business people might find meeting in your or their office more convenient. For less expensive items, a convenient retail location might be appropriate.


Market segmentation in terms of promotion lets you target members of each group in terms of what is important to them, and the objective is to focus your promotional initiatives on those themes and issues. For a low-income market segment, you may run promotions focused on value. For a market segment of young singles, you might emphasize lifestyle ads and outdoor activities. For a segment made up of families, a kid-friendly approach is appropriate. As part of your promotional efforts, you would emphasize product features that appeal to the particular market segment.


A key objective for market segmentation is determining what price different groups of consumers are willing to pay for your product. When you have divided your market into segments based on what people can afford to pay, you can focus on segments that can pay the lowest or the higher prices. For those segments that can afford more, you can offer additional features or a higher level of service. Market segmentation allows you to serve each segment at a price level its members can afford.


Your product could be improved in various ways, but you don’t want to spend money on extra features if they don’t result in additional sales. Determining which features to add can be a market segmentation objective. When you separate your market into groups of similar customers, you can identify specific needs for each segment. If the group is large enough and you can satisfy its needs with an extra product feature, it makes sense to proceed and create a product that has greater appeal to that target market segment.


Benefits to the customer: Segmentation benefits not only the marketer but the customer as well. It distinguishes one customer group from another within a given market. It helps the marketer concentrate on the fulfillment of the well defined needs of the specific segment. Now-a-days, segmentation has attained a high degree of sophistication.

Efficient and economic marketing efforts: Segmentation makes marketing efforts both efficient and economic. Marketers segment the market and try to fulfill the needs of that segment. It helps in designing the kinds of promotional devices that are effective from the view point of customers.

Marketing efforts are focused on the well defined needs of the segment. Thus, marketing efforts undertaken by the marketer become more productive. They help the marketer to evaluate the results of his marketing programme. Best time to introduce new products, advertising etc., could be easily determined.

Tapping a particular market: Segmentation enables the marketer to understand the needs of the customers and serve them well. Prediction of the likely response from each segment is possible. With homogeneous responses from each segment, marketer finds it easy to develop an appropriate marketing programme. By tailoring the marketing programmes to individual market segments, marketers perform their tasks effectively.

Proper choice of target market: The market for any product is made up of several segments. A market is the aggregate of consumers of a given product. Consumers are not a homogeneous lot. They differ a lot in their characters and buying behavior. Thus, many differing segments exist in a market. Market segmentation helps the marketer divide the heterogeneous market. It is possible to distinguish one customer group from another.


  • Buyers often choose from a list of acceptable brands. This is the fact that people alternate between the brands of their list, it would be incorrect to take into consideration and believe that a brand can be successfully positioned to appeal to a very narrow segment.
  • The various brands may be indistinguishable in product form yet differ widely in market share. Therefore, no concept of differentiation among products is required to explain market success.
  • Market segmentation can prove to be an expensive process for the producer and the marketer as well. From marketing point of view the marketer has to develop different marketing mixes for different segments. From production point of view, the producer producing in mass quantities is much cheaper than making variety of products.
  • Markets are not made-up of segments with different wants because buyers of one brand buy other brands as well. This is because the same buyer may buy products in different segments of the market for different family members, or for different occasions or for a change, etc. Hence segmentation does not mean that those within a segment buy only in that segment.
  • The markets examined by them were not heavily segmented as the differences between brands were too insignificant to matter.