Criteria for Effective Market Segmentation

 

About the criteria for effective segmentation

Following the development of market segments by the firm, they then need to be evaluated against a set criterion. Essentially, this review is a checkpoint in the overall market segmentation, targeting and positioning process (known as the STP model/process). This analytical ensures that the resultant market segments are valid and usable for the firm’s purposes.

 

The main criteria for evaluating market segments

The main goal of this stage of the STP process is to ensure that the market segments that have been constructed by the firm meet with basic requirements and guidelines, which will make them usable segments and potential target markets. The best way to think about this step of the STP model is to think about it a review checkpoint.

The following table outlines the main requirements/criteria for a market segment.

Evaluation Criteria

What is it?

Why is it important?

Homogeneous This means that the consumers allocated to each segment should be similar in some relevant way This is the basis of market segmentation – that the consumers in each segment are similar in terms of needs and/or characteristics
Heterogeneous Each segment of consumers should be relatively unique, as compared to the other segments that have been constructed This demonstrates that the consumers in the overall market have been effectively divided into sets of differing needs
Measurable Some form of data should be available to measure the size of the market segment Measurements are very important to be able to evaluate the overall attractiveness of each segment
Substantial The market segment should be large enough, in terms of sales and profitability, to warrant the firm’s possible attention Each firm will have minimum requirements for the financial return from their investment in a market, so it is necessary to only consider segments that are substantial enough to be of interest
Accessible The market segment should be reachable, particularly in terms of distribution and communication Each segment needs to be able to be reached and communicated with on an efficient basis
Actionable/practical The firm needs to be able to implement a distinctive marketing mix for each market segment The range of segments identified generally need to be defined for the capabilities and resources of the organization, so very specialized segments may not be appropriate
Responsive Each market segment should respond better to a distinct marketing mix, rather than a generic offering The key outcome of the STP process is to develop a unique marketing mix for a specified target market, if the segment will not be more responsive to a distinct offering, then the segment can probably be combined with another similar segment

 

You should also review the section on Using the Criteria for Effective Segmentation – as this section provides examples of how to apply the criteria.