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Market segmentation - a fundamental concept of marketing

Published on May 21, 2008 Reviewed on December 29, 2016   23 min

Other Talks in the Series: Principles of Marketing

"Market Segmentation" is one of the most fundamental concepts of marketing and is the key to a successful business performance. It is fairly obvious that there is no such thing as an average customer or average consumer. It's a bit like saying, "My head is in the oven and my feet are in the fridge, so on average, I'm quite comfortable." Let us also get rid of the nonsensical myths about market segmentation such as the a priori nonsense about socioeconomics, demographics, geodemographics and the like. Let me explain, socioeconomic classifications such as A, B, C1, C2, D, and E are useful generic descriptions, which I shall refer to later, but in themselves, they can only be useful at a very general level. For example, the Archbishop of Canterbury and Boy George are both As because of their spending power, but their behavior is almost certainly very different. Likewise, demographics such as young women between the ages of 18 and 24 can only ever be useful as a very high and general indication of patterns of behavior because it is clear that not all 18 to 24-year-olds behave the same. In a similar way, geodemographic classifications such as ACORN which stands for a classification of residential neighborhoods, whilst useful for indicating very likely general patterns of spending power, do not reveal the absurd assumption that everyone in one street drives the same car, reads the same newspapers, eats the same food, etcetera. Yet real segmentation remains the most difficult of all marketing methodologies to implement which is why very few organizations do it properly. Indeed, a recent Harvard Business Review article revealed that in 2006, the main reason for the failure of 30,000 new product launches in the United States of America was inadequate market segmentation. So this will set out, in a very straightforward way, what market segmentation is and how it can be done properly.

Market segmentation - a fundamental concept of marketing

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