Market segmentation A market segment is a classification of potential private or corporate customers by one or more characteristics, in order to identify groups

of customers, which have similar needs and demand similar products and/or services concerning the recognized qualities of these products, e.g. functionality, price, design, etc. An ideal market segment meets all of the following criteria:

It is internally homogeneous (potential customers in the same segment prefer the same product qualities). It is externally heterogeneous (potential customers from different segments have basically different quality preferences). It responds similarly to a market stimulus. It can be cost-efficiently reached by market intervention.

The term segmentation is also used when customers with identical product and/or service needs are divided up into groups so they can be charged different amounts for the services. A customer is allocated to one market segment by the customers individual characteristics. Often cluster analysis and other statistical methods are used to figure out those characteristics, which lead to internally homogeneous and externally heterogeneous market segments. Examples of characteristics used for segmentation:

Gender Price Interests Location Religion Income Size of Household

While there may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create

Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage. Criteria for Segmenting Homogenity (within a segment)

similar responses to marketing mix similar segmenting dimensions

Heterogenity (between segments)

different responses to marketing mix different segmenting dimensions

Substantial

segment is big enough to be profitable

Operational

useful for identifying customers useful in deciding on marketing mix

Basis for segmenting consumer markets Geographic segmentation The market is segmented according to geographic criteria- nations, states, regions, counties, cities, neighborhoods, or zip codes. Geo-cluster approach combines demographic data with geographic data to create a more accurate profile of specific [ Demographic Segmentation Segmentation by Age, gender, Income, social class, etc. Psychographic Segmentation Psychographics is the science of using psychology and demographics to better understand consumers. Psychographic segmentation: consumer are divided according to their lifestyle,

personality, values. People within the same demographic group can exhibit very different psychographic profiles. "Positive" market segmentation Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries. Industrial market segmentation Is a scheme for categorizing industrial and business customers to guide strategic and tactical decision-making, especially in sales and marketing. While government agencies and industry associations use standardized segmentation schemes for statistical surveys, most businesses create their own segmentation scheme to meet their particular needs. While similar to consumer market segmentation, segmenting industrial markets is different and more challenging because of greater complexity in buying processes, buying criteria, and the complexity of industrial products and services themselves. Further complications include role of financing, contracting, and complementary products/services. The goal for every industrial market segmentation scheme is to identify the most significant differences among current and potential customers that will influence their purchase decisions or buying behavior, while keeping the scheme as simple as possible (Occam's Razor). This will allow the industrial marketer to differentiate their prices, programs, or solutions for maximum competitive advantage.

Using Segmentation in Customer Retention Process for tagging customers The basic approach to tagging customers is to utilize historical retention data to make predictions about active customers regarding:

Whether they are at high risk of canceling their service

Whether they are profitable to retain What retention tactics are likely to be most effective

The idea is to match up active customers with customers from historic retention data who share similar attributes. Using the theory that birds of a feather flock together, the approach is based on the assumption that active customers will have similar retention outcomes as those of their comparable predecessor.

Niche Marketing A niche is a more narrowly defined customer group who seek a distinct set of benefits. dentified by dividing a segment into subsegments, distinct and unique set of needs, requires speciallization, and is not likely to attract too many competitors. Local Marketing Marketing programs tailored to the needs of local customer groups.