What Is The Importance Of Market Segmentation?

Market segmentation is vital for any business that wants to maintain a good, positive relationship with its customers.  Segmentation basically involves a company breaking down potential target markets into distinct groups. This may be based on age, location, household income or even gender.

There are a number of benefits involved with adopting this strategy in marketing including the following:

•It helps a business understand the needs of its customer base more. This will help the company devise products and services that the customers want and more importantly need.

•A business can develop a product or service with a specific customer base in mind. This helps it stand out the competition and may secure continued growth and revenue.

•The primary target market can be identified and resources are then designed to target this group. This is known as Customer Relationship Marketing (CRM) and is highly effective in targeting the correct audience using the right messages.

•Marketing messages and strategies become more efficient as the company only contacts those they believe will be interested in their products. This means less money will be wasted on ineffective campaigns that do not reach the right customer base.

•The company can make savings as it only has to spend money to develop products and services for a particular group of people.

Importance market segmentation

• Organisation get to know its customers better
• Provides guidelines for resource allocation
• It helps focus the strategy of the organization

It is particularly important for small businesses, which often lack the resources to target large aggregate markets or to maintain a wide range of differentiated products for varied markets. Market segmentation allows a small business to develop a product and a marketing mix that fit a relatively homogeneous part of the total market. By focusing its resources on a specific customer base in this way, a small business may be able to carve out a market niche that it can serve better than its larger competitors.