It involves dividing a broad target market into subsets of consumers who have common needs & priorities. Based on segments generated targeted strategies can be designed and implemented to target the consumer base. Segmentation allows companies to create product differentiation strategies to target consumer base.
An ideal market segment should ideally have the below elements:
• Possible to measure.
• Large enough to earn profit.
• Stable enough that it does not vanish after some time.
• Possible to reach potential customers via the organization’s promotion and distribution channel.
• Internally homogeneous (potential customers in the same segment prefer the same product qualities).
• Externally heterogeneous, that is, potential customers from different segments have different quality preferences.
• Should respond consistently to a given market stimulus.
• Should be reachable by market intervention in a cost-effective manner.