Market segmentation is used as a strategic marketing tool for defining markets/customer groups and to decide which ones to focus on. An organisation cannot satisfy the needs and wants of all customers – to do so may result in a waste of company resources.
Segments with customers that fit the company strategy and offering should be prioritized whereas there is no point in wasting time, money and manpower on segments that are not profitable or where the customer demands and expectations completely differ from what the company can offer in terms of products or service.
Market segmentation allows the company to prioritize their most promising markets
The process of dividing the market into “homogenous subgroups” allows a company to gain a greater understanding of specific requirements and needs in different target groups. Knowing what each target group requires makes it possible to adapt products and service offerings so that they correspond to what the customers need and want.
Knowing what each target group wants and needs makes it possible to form better strategies and to make better decisions, e.g when it comes to marketing and sales activities. Segmentation allows the company to lead an effective product strategy and product development, which is compatible with customer needs.
Knowing what triggers customers in different segments allows for more tailor-made and effective marketing campaigns and sales activities. Market segmentation is rightly described as the strategy of “dividing the markets in order to conquer them”. Due to segmentation, a firm can avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives. Advertising media can be more effectively used because only the media that reach the segments can be employed. It makes advertising result oriented.