What is Market Segmentation Strategy? Definition of Market Segmentation Strategy, Market Segmentation Strategy Meaning and Concept

The market segmentation strategy is used by every company when it decides to divide the total market in which it competes into groups that have homogeneous characteristics.

Of course, for the strategy to be effective, the company must divide its customers into groups of members who have similar needs, likes, desires, and preferences. Each group forms a different segment, that is, each group must be different from one another.

Therefore, each segment has traits that are common among its members, which makes it a homogeneous group. But at the same time it has to be heterogeneous between one group and another, because all the segments must be different from each other.

In addition, to divide the market into segments, the company needs to have a lot of information about its customers, then it must select the segment or segments it decides to serve. The chosen segment or segments constitute its target group or target market for the company.

Types of segmentation strategies

The most common segmentation strategies that companies use are:

1. Undifferentiated segmentation strategy

Certainly in this case the company recognizes that there are different segments in the market, but chooses not to target a particular group. Therefore, it focuses on the entire market using the same marketing plan and presenting a single offer to satisfy the need. In other words, it decides to serve the mass market.

  • Advantage: A company that uses undifferentiated segmentation gains advantages in achieving a higher level of production efficiency, which in turn helps it to maintain lower production and marketing costs.
  • Disadvantage: The most important risk faced by a company that goes to the market with a standardized product, occurs when they face competitors who offer specialized products that meet the needs of the market in a superior way.

2. Differentiated segmentation strategy

On the contrary, differentiated segmentation implies that the company identifies and selects one or more segments that it decides to serve. Each segment presents common features and characteristics to meet a specific need.

In fact, the company prepares a specialized product and marketing plan for each group. If you focus on a single group you use the market concentration strategy and if you target several segments you use the multi-segment strategy.

3. Niche market strategy

Instead, the niche strategy is applied when the company decides to focus all its marketing efforts to serve a market segment that is relatively small and well defined. These small groups are known as niche markets, which have unique and specific needs.

Above all, this requires that the company clearly understand and understand the needs of that small group it chooses as its target market. Then prepare a specific product and marketing plan that meets the need superior and comprehensively.

Although the group size may be relatively small, the company can make it a productive and important segment. Because it is relatively small, it does not become attractive to large companies, so they find few or no competitors.

Market segmentation strategy

Criteria for segmenting

The most common criteria companies use to segment are:

  • Consumer conduct or behavior.
  • Demographic aspects.
  • Psychographic factors.
  • Geographic variables.

Market segmentation strategy
Criteria to segment

Finally, we can conclude that the main objective of segmentation strategies is to divide the market into groups and segments. In this way, the needs and characteristics of each group can be determined and precisely known, so that the company prepares a product and a marketing plan that focuses specifically on meeting the requirements of each group in a superior way.