Market Segmentation Market segmentation is a concept in economics and marketing.

A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts for the services. The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can be broadly viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups.

Market segmentation is one of the steps that goes into defining and targeting specific markets. It is the process of dividing a market into a distinct group of buyers that require different products or marketing mixes. A key factor to success in today's market place is finding subtle differences to give a business the marketing edge. Businesses that target specialty markets will promote its products and services more effectively than a business aiming at the "average" customer. Opportunities in marketing increase when segmented groups of clients and customers with varying needs and wants are recognized. Markets can be segmented or targeted using a variety of factor. The bases for segmenting consumer markets include:

Demographic bases (age, family size, life cycle, occupation) Geographic bases (states, regions, countries) Behavior bases (product knowledge, usage, attitudes, responses) Psychographic bases (lifestyle, values, personality)

A business must analyze the needs and wants of different market segments before determining their own niche. To be effective in market segmentation keep the following things in mind:

Segments or target markets should be accessible to the business. Each segmented group must be large enough to provide a solid customer base. Each segmented group requires a separate marketing plan.

Large companies segment their markets by conducting extensive market research projects. This research is often too expensive for small businesses to invest in, but there are alternative ways for to a small business to segment their markets. A small business can do the following to gain knowledge and information on how to segment their markets:

1. Use secondary date resources and qualitative research. You can use the following resources for external secondary data: o Trade and association publications and experts o Basic research publications o External measurement services 2. Conduct informal factor and cluster analysis by: o Watching key competitors marketing efforts and copying them. o Talking to key trade buyers about new product introductions o Conducting needs analysis from qualitative research with individuals and groups. There are many reasons for dividing a marketing into smaller segments. Any time you suspect there are significant, measurable differences in your market you should consider market segmentation. By doing so you will make marketing easier, discover niche markets, and become more efficient with your marketing resources. Target Marketing
A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise.[1] A well-defined target market is the first element to a marketing strategy. The target market and the marketing mix variables of product, place(distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace.

Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small businesss success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities. So if, for instance, I open a catering business offering catering services in the clients home, instead of advertising with a newspaper insert that goes out to everyone, I could target my market with a direct mail campaign that went only to particular residents. While market segmentation can be done in many ways, depending on how you want to slice up the pie, three of the most common types are:

Geographic segmentation based on location such as home addresses; Demographic segmentation based on measurable statistics, such as age or income; Psychographic segmentation based on lifestyle preferences, such as being urban dwellers or pet lovers.