At the end of the day, all marketing is about segmentation.
Marketing and segmentation both strive to understand and then respond to the different needs (consumer needs or business needs) of different groups of customers.
Market segmentation is the process by which customers in markets with some heterogeneity are grouped into smaller, more similar (homogeneous) segments in order to make marketing to them more targeted and cost effective.
Segmentation is crucial for the simple reason that all customers are different and in terms of income, some customers are much more important (i.e. profitable) than others.
The 80/20 principle suggests that a majority of your company’s revenue is likely to come from a minority of your customers. So you need to know where to target your marketing budget to gain the highest return.
Segmentation is about dividing the total market population into defined groups according to certain characteristics/variables (consumer variables and business variables) that can be associated with a likely appetite for a particular variation of your product offer/marketing mix.
Truly effective marketing is about personalisation and customisation not just of messages, but of the product or service you’re selling, so as to meet different customer needs.
The way you talk to an 18-year-old and the media you choose use will be different to the way you communicate with an 80-year-old. And to do this you need to segment your audience/database.
The concept of segmentation, defined:
"The process of grouping customers in markets with some heterogeneity into smaller, more similar or homogeneous segments".
Dibb et al. (2006)
They also defined a market segment as:
"A group of individuals or organisations sharing one or more similar characteristics that cause them to have relatively similar product needs and buying characteristics"
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