Marketing Plan Segmentation Criteria

Market research firm Lazarus Research defines the process of market segmentation as subdividing a heterogeneous population of customers into subgroups or segments. Segmentation helps marketing managers direct marketing dollars and design products to maximize profits. Lazarus Research lists five necessary elements for segmentation: homogeneous, heterogeneous, identifiable, accessible and profitable.

Homogeneous

The consumers within a segment should have common requirements, desired outcomes and similarities. This ensures that the entire segment responds in the same way to a marketing campaign. It is not feasible for a business to execute a personalized marketing campaign for each individual consumer. For example, a car company advertising sport utility vehicles will usually design one advertising campaign across all communication platforms.

Heterogeneous

There should be clear differences between market segments, which allow companies to tailor their marketing plans accordingly. For example, the marketing campaign for a sports coupe aimed at young male professionals is going to be different than the marketing campaign for a family sedan. Marketing plans for the same product, such as a desktop computer, will be different for consumer and business markets and for different geographic markets.

Identifiable

The segments must be identifiable and measurable. Demographic, psychological and behavioral characteristics are some of the key ways to identify and access segments. Demographic factors include age, education, gender and occupation; psychological or lifestyle factors include analyzing consumers' activities and interests to understand buying patterns; and behavioral characteristics include data about how, when and where customers buy certain products. Measurable and identifiable segments provide information on the marketing investments required for each segment to achieve sales and profit objectives.

Accessible

Accessibility ensures that a marketing campaign is able to target a segment's consumers effectively. Marketing actions should be concentrated for maximum impact. For example, an anti-smoking drug manufacturer needs to reach smokers in key age groups in all geographies. Specific television programs, direct mail and pharmacists might be some of the communication and distribution channels the drug company can use to reach its target consumer segments.

Profitable

Segments must be profitable to justify marketing expenditures. Profitability factors include size, growth, competitive position and resource availability. The market segment should be large and growing for businesses to achieve consistent profitability. Businesses that have a strong competitive position with respect to industry peers and have the resources will be able to maintain their competitive advantage.

Considerations

IBM Global Business Services strategy consultant Saul J. Berman wrote that old segmentation approaches, such as demographic segmentation, could distract marketing managers from changes in customer preferences. For example, technology innovations should be used to track consumer-buying behavior in real time and make the necessary marketing adjustments.

References

• Lazarus Research; Elements of a Successful Business Plan -- Market Segmentation
• "Harvard Business Review"; New Criteria for Market Segmentation; Daniel Yankelovich; March/April 1964
• Oxford University Press; Market Segmentation and Positioning; Paul Baines, et al.
• "Harvard Business Review"; Learning How to Make Market Segmentation Work Again; Saul J. Berman; March 2011

Resources

• "Marketing"; Paul Baines, et al.; 2008