Top 10 Benefits of Market Segmentation

Why would you want to use customer segmentation? Generally speaking, no company will want to produce what people will not buy. This is most compelling in the increasingly competitive and complex business environment. To be successful, you must be able to profitably identify and satisfy the needs and wants of your current and potential customers. Simply put, market segmentation is the subdivision of a total market into a smaller target market based on factors such as age, geographic location, gender, spending pattern, or language.

Market segmentation is based on the premise that consumers have different needs and wants, and a careful analysis of these requirements can reveal unmet needs and wants.

Here are the top 10 benefits of market segmentation:

1. Improve your understanding of consumers and, above all, why they buy.

2. Facilitates the development and implementation of appropriate marketing programs.

3. Consumers’ requirements are constantly changing, so an ongoing market segmentation program increases their capabilities to meet changing market demands.

4. Direct your efforts to where you have the best competitive advantages considering your competitive strengths and weaknesses. In other words, market segmentation helps companies focus their business efforts.

5. Promotes efficient allocation of marketing resources. For example, product and advertising appeals can be better coordinated and targeted to specific markets. Similarly, proper management of media plans minimizes waste from overexposure. All of this results in a sharper brand image.

6. Facilitates control. Since target markets are defined based on a set of objectives, performance can be evaluated in the light of modification or improvement with respect to expected results.

7. Promotes the development of new products. A better understanding of your potential and existing customers allows you to identify any unmet needs or wants. This process also allows you to modify or develop new products that satisfy your target markets most of the time.

8. Market segmentation helps build customer relationships. By providing selected offers for selected groups (target markets) in an effective and efficient way, you not only build better customer relationships and greater brand loyalty, but also prevent rebranding.

9. Improve competition. By focusing and understanding what your target markets need and want, you could create an engaging campaign that directly targets your potential customers, thereby outperforming your competitors. Finally,

10. Market segmentation helps set the price of products. When you find the ideal market for your products, it’s easy to price your products for each target segment.