Reasons to Use Market Segmentation

Reasons why firms segment markets

There are many reasons why firms identify market segments, as outlined in the following table:

Reasons why market segmentation is used


Target markets Obviously the main reason is to help identify potential target markets
Market understanding Splitting the overall market into smaller groups helps managers have a much greater understanding of the marketplace, as they gain knowledge of differing consumer needs within the same market
Marketing mix It is then easier to develop a marketing mix is based upon the needs of a precise market
Competitive position It can be easier to compete against existing firms by focusing upon a smaller, more defined, group of consumers
New opportunities Creative approaches to market segmentation may generate new opportunities
Avoid mass-marketing In today’s environment, it is generally quite difficult to be successful as a mass-marketer
More offerings Firms are better able to position multiple products in the same overall market by defining and understanding multiple segments
Niche marketing Some firms find success as niche marketers (pursuing very narrowly defined segments) and this specialized approach becomes their basis of their competition advantage