What are the requirements for effective segmentation?

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What are the requirements of segmentation in retail strategy?
What is not a requirement of effective segmentation?

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Effective market segmentation can be achieved only when the market has heterogeneous needs and characteristics, the need and characteristics are measurable, the market is accessible to the marketer, and it is large enough to be profitable.

1. Heterogeneous Needs And Characteristics

Segmentation of a market is meaningful only when significant difference exists in buyers' product needs. Segmentation also requires difference in buyers' characteristics, particularly relating to buying power and behavior. Difference in product needs and buyer characteristics help the organization to divide the total market into smaller market segments.

2. Measurable

For effective market segmentation, information on buyers' needs and characteristics should be obtainable and measurable. If the segmentation is based on the common variables, such as age, sex, income level or life-style the organization can obtain such informationfrom the market. However, of segmentation is based on the desire of female buyers to look young and beautiful, such information may be difficult to obtain and measure.

3. Accessibility

The market segment should be accessible through the existing marketing institutions, such as distribution channels, advertising media and the sales force. Market segmentation has no value if the organization can not find middlemen to distribute the organization's product in a particular segment, and if communication to the buyers in the segment is not possible.

4. Profitability

The market segment should be large enough to give the organization adequate profit. This is the reason for adopting target marketing instead of individual marketing. Individual marketing provides opportunity to perfectly match the product-service offer to the specific needs of the buyer. If each individual purchase is of very large unit value, then the organization may find the market segment profitable enough to the approached with separate marketing mix. this may be the case in marketing of such products as the aircraft or the hydro-electric turbine. For many of the consumer products, individual marketing is highly expensive and not profitable for many large organizations.

There are following criteria for an effective segmentation:

i. Measurable and Obtainable:

The size, profile and other relevant characteristics of the segment must be measurable and obtainable in terms of data.

It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organisation with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behaviour (frequency, volume, product groups, mode of payment etc).

ii. Relevant:

The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment. If a segment is small in size then the cost of marketing activities cannot be justified.

iii. Accessible:

The segment has to be accessible and servable for the organisation. That means, the customer segments may be decided considering that they can be accessed through various target-group specific advertising media such as magazines or websites the target audience likes to use.

iv. Substantial:

The segments should be substantial to generate required returns. Activities with small segments will give a biased result or negative results.

v. Valid:

This means the extent to which the base is directly associated with the differences in needs and wants between the different segments. Given that the segmentation is essentially concerned with identifying groups with different needs and wants, it is vital that the segmentation base is meaningful and that different preferences or needs show clear variations in market behaviour and response to individually designed marketing mixes.

vi. Unique or Distinguishable or Differentiable:

The market segments have to be that diverse that they show different reactions to different marketing mixes. If not then there would have been no use to break them up in segments.

vii. Appropriate:

The segments must be appropriate to the organisation’s objectives and resources.

viii. Stable:

The segments must be stable so that its behaviour in the future can be predicted with a sufficient degree of confidence.

ix. Congruous:

The needs and characteristics of each segment must be similar otherwise the main objective of segmentation will not be served. If within a segment the behaviour of consumers are different and that they react differently, then a unique marketing strategy cannot be implemented for everyone. This will call for a further segmentation.

x. Actionable or Feasible:

It has to be possible to approach each segment with a particular marketing programme and to draw advantages from that. The segments that a company wishes to pursue must be actionable in the sense that there should be sufficient finance, personnel and capability to take them all. Hence, depending upon the reach of the company, the segments must be selected.

xi. Some general considerations:

Apart from the above-mentioned characteristics, the segment must have some other features:

i. Growth potential

ii. Profitable

iii. Less risk prone

iv. Less competition intensive

What are the requirements for effective segmentation Slideshare?

Requirements for effective segmentation.

IDENTIFYING MARKET SEGMENTS AND TARGET..

Segmenting for Business Markets Demographic Operating Variable Purchasing Approaches Situational Factors Personal Characteristics..

What are the requirements for effective segmentation quizlet?

Terms in this set (5).

measurable. size, purchasing power and profiles of segments can be identified and measured. ... .

accessible. market segments can be reached and served..

substantial. the market segments are large or profitable enough to serve..

differentiable. segments are distinguishable from other segments..

actionable..

What are the requirements of segmentation in retail strategy?

Market Segmentation: Key Criteria Demographic: age, religion, gender, income, socio-economic type, education, family size/status. Psychographic: lifestyle, interests, hobbies, opinions, influencers. Behavioral: buyer journey stage, brand loyalty traits, price sensitivity, purchasing style, usage rate.