Market Segmentation in a Nutshell

Market segmentation in a nutshell is the discovery of distinct groups of customers (or potential customers) that are categorized by similarities across multiple attitudinal, psychographic, geographic, or demographic variables for the purpose of customizing marketing, product development, customer service, technical support and other business operations to better serve customers.

Note that this is a practical or applied market research definition, not an academic or theoretical one. In the academic and theoretical world, market segmentation has specific parameters which define the process. In the practical or applied marketing world, market segmentation is a continuum that ranges from market segmentation demographic segments to market segmentation strategies. Practical application draws upon (and in truth is based on and grounded in) theoretical approaches, but takes into account the shifting turbulence of marketing in the real world to real customers.

So how does market segmentation apply to firms that are looking to up their marketing game? From a nuts and bolts perspective, segmentation provides a means of classifying customers into similar groups for which you can develop specific marketing communications, develop specific products and even hone your business operations to serve the hot buttons of each segment.

One way to conceptualize by looking at the evolution from traditional marketing to, if you will, Marketing 2.0.

Traditional marketing tends to throw a broad net to reach customers. Marketing departments develop a brochure, a mailing, an ad (radio, television, print), that spoke to what the organization believed was a typical potential customer. And often, these communications would be focused mainly on explicating the products or services the organization offered rather than being focused on the needs of, and therefore, the benefits to the customer. Moreover, the organization was offering the communication to everyone in the market with the hope of reaching their target.

Now, of course, marketing, even traditional marketing, has gotten much more sophisticated than this. But the principle still applies--marketing carries much more power when it is carefully targeted to reach the specific audience for which it is intended and when marketing speaks directly to the needs, wants, desires, and aspirations of that specific audience.

In Marketing 2.0, with the advent of online marketing, and the splintering of the consumer market into smaller and smaller groups, even to the market of one, it is now possible to deliver communications directly to potentially interested customers.

Market segmentation provides the specificity of those customers' needs, wants, desires and aspirations.

The old marketing model was limited by the ways customers could be reached. By definition, in a world with only a limited number of mass media communications channels, marketers had to go broad to try and reach their audience. In today's world, communication channels are approaching the ability to target a market of one.

With the explosion of information available about customers, marketers can use market segmentation more effectively now than ever before. This website is primarily a discussion of how to do so.