Actionable: each segment should possess characteristics that make it attractive for pursuit with a unique market/product strategy, e.g., disruptive, differentiated, dominant, sustaining, etc.This ensures all segments are discovered and the most attractive segments can be targeted. Collectively exhaustive: 100 percent of the customer population should be effectively classified by the segmentation scheme so all customers are accounted for.Mutually exclusive: the set of needs that customers believe are underserved, overserved and appropriately served should be different from segment to segment.Homogeneous population: the population of each segment should be homogeneous, with little variation in the needs customers believe are underserved, overserved and appropriately served.
In short, market segmentation is a method companies use to discover segments of opportunity: groups of customers with different under/over-served needs.Ĭonsequently, the segments resulting from a good market segmentation scheme should possess these 4 characteristics: You could define a market as an industry vertical, such as health care or retail - and segment your market around geographic region or size of the business.īut when it comes to informing product marketing and innovation, what is the best approach? To answer that question, let’s remind ourselves why we want to segment a market in the first place.Ĭ ompanies employ market segmentation methods as a means to discover groups of customers that have similar needs so that product offerings can be uniquely tailored to - and effectively positioned at - each segment.You could define a market as a technology, such as semiconductors - and segment your market around technology applications.You could define a market as a group of people - and segment those people based on similarities in their demographics, psychographics, attitudes, behaviors or the generation in which they were born.When thinking about market segmentation, an important first question to ask is, “What is a market?” After all, how you choose to define a “market” will determine just what it is you will try to segment. When it comes to discovering hidden segments of opportunity, outcome-based market segmentation gets the job done best.