To help guide the selection of the best segmentation bases/variables to use for an organization, the marketer needs to consider the advantages and limitations of each potential approach.
This knowledge is required because there is a wide selection of segmentation variables to choose from and some bases are more appropriate than others for certain products and markets.
The below information is focused upon consumer market segmentation bases, if more appropriate for your needs you should refer to the section on Business Segmentation.
It would also be beneficial to review the Full STP Process for an understanding of the overall purpose of market segmentation.
List of advantages and limitations of the main segmentation bases
The following table summarizes the major advantages and limitations of each approach:
This is quite a valuable approach for a large company that operates across many countries, as geographic segmentation would allow them to consider cultural differences
It is also quite an effective approach for small firms, with limited resources that often need to operate in a defined geographic area for efficiency purposes.
Also tends to work well in cities/countries where there are significant differences in socio-economic status in different geographic areas, or where there is significant changes in lifestyle across regions
This segmentation base is quite limited as it assumes that all consumers in a geographic area are similar in needs
Therefore, geographic segmentation typically needs to be used in conjunction with another segmentation base
Demographic segmentation is very simple to apply and use, as government statistical data is readily available in most countries
Suitable data can be obtained quite quickly and cheaply
As segmenting by demographics is also easy for everybody to understand, from management, to sales and customer service staff, it can be more easily built into an internal marketing plan
Just like the limitation with geographic segmentation, this approach is also based on an assumption that consumers in the same demographic group would have similar needs
This is unlikely, as not all 30 year old consumers have the same needs
Therefore, the biggest limitation with this segmentation approach is that there is very little understanding of the consumer themselves
Psychographic segmentation gives a much better insight into the consumer as a person, which more likely lead to the identification of underlying needs and motives
As a result, psychographic segmentation should deliver a much better understanding of the consumer, which in turn which should create more valid and responsive segments and subsequent marketing programs
Unfortunately this approach requires the organization have detailed data/research on the consumer. Hence it is far more suitable for a larger organization and is probably beyond the scope of a small business
there are also some concerns regarding data and interpretation, and perhaps the creation of segments that cannot be easily accessed or practical in real life (For more information, please refer to the section on the criteria for effective segmentation)
This is very effective segmentation method for companies that offer products that have unique features, as this will allow them to identify which products/design they should offer and which benefits they should promote
It is also an effective tool for large companies who want to fragment the market and create multiple market segments, in order to reduce the threat from competitive rivalry
Firms too reliant on benefit segmentation may end up being lacking in innovation, as they could end up focusing on existing needs/benefits rather than look at other opportunities and other ways of meeting customer needs
This style of segmentation is often used in mature markets, where the firm is looking to understand: how to activate a non-user, target switchers, convert a medium user to a heavy user and so on
However, this approach does not really consider why consumers buy the product, their needs or their lifestyles – so the level of market understanding may not be as high
It also heavily relies upon obtaining detailed market intelligence, and probably the use of a marketing models and databases for market testing and experimentation
- Should I Use Geographic Segmentation Bases?
- Should I Use Demographic Segmentation Bases?
- Should I Use Psychographic Segmentation Bases?
- Should I Use Behavioral Segmentation Bases?
- Should I Use Benefits Sought Segmentation Bases?