Market segmentation is widely defined as being a complex

process consisting in two main phases:

• identification of broad, large markets

• segmentation of these markets in order to select the most

appropriate target markets and develop Marketing mixes

accordingly.

Everyone within the Marketing world knows and speaks of

segmentation yet not many truly understand its underlying

mechanics, thus failure is just around the corner. What causes

this? It has been documented that most marketers fail the

segmentation exam and start with a narrow mind and a bunch of

misconceptions such as "all teenagers are rebels", "all elderly

women buy the same cosmetics brands" and so on. There are many

dimensions to be considered, and uncovering them is certainly

an exercise of creativity.

The most widely employed model of market segmentation comprises

7 steps, each of them designed to encourage the marketer to come

with a creative approach.

STEP 1: Identify and name the broad market

You have to have figured out by this moment what broad market

your business aims at. If your company is already on a market,

this can be a starting point; more options are available for a

new business but resources would normally be a little limited.

The biggest challenge is to find the right balance for your

business: use your experience, knowledge and common sense to

estimate if the market you have just identified earlier is not

too narrow or too broad for you.

STEP 2: Identify and make an inventory of potential customers'

needs

This step pushes the creativity challenge even farther, since

it can be compared to a brainstorming session.

What you have to figure out is what needs the consumers from

the broad market identified earlier might have. The more

possible needs you can come up with, the better.

Got yourself stuck in this stage of segmentation? Try to put

yourself into the shoes of your potential customers: why would

they buy your product, what could possibly trigger a buying

decision? Answering these questions can help you list most

needs of potential customers on a given product market.

STEP 3: Formulate narrower markets

McCarthy and Perreault suggest forming sub-markets around what

you would call your "typical customer", then aggregate similar

people into this segment, on the condition to be able to

satisfy their needs using the same Marketing mix. Start

building a column with dimensions of the major need you try to

cover: this will make it easier for you to decide if a given

person should be included in the first segment or you should

form a new segment. Also create a list of people-related

features, demographics included, for each narrow market you

form – a further step will ask you to name them.

There is no exact formula on how to form narrow markets: use

your best judgement and experience. Do not avoid asking

opinions even from non-Marketing professionals, as different

people can have different opinions and you can usually count on

at least those items most people agree on.

STEP 4: Identify the determining dimensions

Carefully review the list resulted form the previous step. You

should have by now a list of need dimensions for each market

segment: try to identify those that carry a determining power.

Reviewing the needs and attitudes of those you included within

each market segment can help you figure out the determining

dimensions.

STEP 5: Name possible segment markets

You have identified the determining dimensions of your market

segments, now review them one by one and give them an

appropriate name.

A good way of naming these markets is to rely on the most

important determining dimension.

STEP 6: Evaluate the behavior of market segments

Once you are done naming each market segment, allow time to

consider what other aspects you know about them. It is

important for a marketer to understand market behavior and what

triggers it. You might notice that, while most segments have

similar needs, they're still different needs: understanding the

difference and acting upon it is the key to achieve success

using competitive offerings.

STEP 7: Estimate the size of each market segment

Each segment identified, named and studied during the previous

stages should finally be given an estimate size, even if, for

lack of data, it is only a rough estimate.

Estimates of market segments will come in handy later, by

offering a support for sales forecasts and help plan the

Marketing mix: the more data we can gather at this moment, the

easier further planning and strategy will be.

These were the steps to segment a market, briefly presented. If

performed correctly and thoroughly, you should now be able to

have a glimpse of how to build Marketing mixes for each market

segment.

This 7 steps approach to market segmentation is very simple and

practical and works for most marketers. However, if you are

curious about other methods and want to experiment, you should

take a look at computer-aided techniques, such as clustering

and positioning.