In business administration and marketing, market segmentation is the division of a market into market segments according to certain criteria as well as the market cultivation of these market segments. Market segmentation is a sub-area of segmentation in microeconomics. Its purpose is to offer the right products or services to the right customers. Therefore, the market segmentation is carried out by the product groups offered, marketing mix and target groups. The total market of all current and potential customers is divided into segments that contain consumers with similar consumer behavior and attitudes. The segments should be internally homogeneous and differ as much as possible from other groups.
In market segmentation, the market must be divided into heterogeneous submarkets. Market segmentation includes both the division of an overall market into market segments and the development of one or more of these market segments by means of appropriate marketing instruments.
In business administration, markets are often segmented according to customer types, while in economics, criteria such as the so-called substitution gap or the concept of the relevant market play a role. Closely related to market segmentation are the terms of target group and business area.
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Target groups
play a particularly important role in market development. The aim here is to address different customer groups (target groups) within a market segment with suitable communication instruments and the corresponding distribution channels (targeting).
Strategic Business Areas
Strategic business areas are more closely linked to the market segments. The difference here lies in the level of aggregation. While relatively rough criteria are used to define business areas, market segmentation is more detailed. In the case of companies with a strong customer-oriented orientation, business areas and market segments can overlap greatly.
Submarkets
Submarkets, as supply-side segments, are to be strictly separated from the market segments, which are always to be understood on the demand side.
Market segmentation is situational. The specific tasks of companies in marketing and sales determine the perspective of segmentation. Last but not least, the available market data also determines the segmentation approach. In many cases, different segmentations are lived side by side in one and the same company. The challenge is to coordinate the individual approaches from different parts of the company.
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Market segmentation occupies a central position within marketing and is one of the most discussed concepts in economics. It is seen as the “key to market success”, as it is the only way to concretely enable the basic idea of marketing – the consistent alignment with customer wishes.
Statistical market segmentation uses statistical methods of data mining to divide the overall market into internally homogeneous and mutually heterogeneous market segments. In particular, the combination of factor and cluster analysis has proven to be useful here.
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