It is difficult to effectively cater for everybody in the market place, so businesses will aim their products and services at specific parts of the market.This diagram effectively captures segmentation requirements and criteria
A successful market segment will usually meet the following criteria:
Clearly Defined and Distinguishable Segment
The chosen segments should be clearly defined to avoid doubt about which part of the market, the firm's marketing activities are aimed at. Otherwise there is a risk that market activities will "spill over" into different segments. If there is more than one segment, you will need to assess whether each segment will require specific marketing. For example if married and unmarried men behave similarly when purchasing shoes, there is little value in placing them in different segments.
Measurability of Segment
Before embarking on a sales strategy it is important to know the size of existing sales in that segment. A firm also needs to know how product sales are growing in the chosen segment. If you can not measure the growth rate, it will be difficult to assess whether your chosen segment is profitable.
Accessibility of Segment
Accessibility includes communicating with your customers; communication is usually through the internet, TV, radio. However if target customers do not use these things it will be difficult to communicate with them. Post is also a challenge unless you can find out where people making up your market segment live. If you cannot target your segment effectively through marketing communication your marketing strategy will fail.
The other aspect of accessibility is being able to distribute your product to your chosen segment. For example a shop based in South London is unlikely to get a large number of customers from North England. In this instance the shop will have to reassess its chosen segment or think about solutions to help accessibility such as selling to customers through the internet.
Size and Suitability Of Segment
Firms need to ensure that the segment is suitable by ensuring that consumers making up the segment are likely to buy the product and have the spending power to buy the product. There also needs to be an opportunity to increase product sales within the chosen segment.
For example if the firm's chosen segment involves selling smart phones to people aged 20-30 who don't own a smart phone. If 95% of this age group own a smart phone, the chosen segment will probably need to be reconsidered as only 5% of the chosen segment don't own a smart phone.
On the other hand if the firm's marketing strategy involves persuading people to replace their smart phone it may be a suitable segment as 95% of the segment are the type of people likely to buy smart phones.
Segment suitability also includes the size of the segment. If the segment is too small, potential for sales growth will be limited. If is is too large, it will be difficult to create marketing activities to suit all of the groups included in the segment.
Actionability of Segment
Even if all of the criteria listed above are satisfied a segment is unsuitable unless the business has the resources to cater for the needs of the segment. For example a small business with a £45000 turnover may struggle to fulfill a multi million pound manufacturing contract.
An effective segment is defined as, measurable, accessible, actionable and suitable for the firm. A firm can profit from a segment with growing product sales if it has; .
- a clearly defined and distinguishable segment
the resources to cater for its segments and
access to its chosen segment,
If any of these elements are missing it will hinder segmentation strategy.