Pre-requisites / Requirements of Effective Segmentation

1. Measurable

The size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables are difficult to measure. For example, there are approximately 30.5 million left handed people in the United States, which is nearly the entire population of Canada. Yet few products are targeted toward this left-handed segment.

The major problem may be that the segment is hard to identify and measure. There are no data on the demographics of lefties, and the U.S. Census Bureau does not keep track of left handedness in its surveys. Private data companies keep reams of statistics on other demographic segments but not on left-handers.

Before embarking on a sales strategy it is important to know the size of existing sales in that segment. A firm also needs to know how product sales are growing in the chosen segment. If you cannot measure the growth rate, it will be difficult to assess whether your chosen segment is profitable.

2. Accessible

Accessibility includes communicating with your customers; communication is usually through the internet, TV, radio. However if target customers do not use these things it will be difficult to communicate with them. Post is also a challenge unless you can find out where people making up your market segment live. If you cannot target your segment effectively through marketing communication your marketing strategy will fail.

The other aspect of accessibility is being able to distribute your product to your chosen segment. For example a shop based in South London is unlikely to get a large number of customers from North England. In this instance the shop will have to reassess its chosen segment or think about solutions to help accessibility such as selling to customers through the internet.

The market segments must be effectively reached and served. Suppose a fragrance company finds that heavy users of its brand are single men and women who stay out late and socialize a lot. Unless this group lives or shops at certain places and is exposed to certain media, its members will be difficult to reach.

3. Substantial

Firms need to ensure that the segment is suitable by ensuring that consumers making up the segment are likely to buy the product and have the spending power to buy the product. There also needs to be an opportunity to increase product sales within the chosen segment.

For example if the firm's chosen segment involves selling smart phones to people aged 20-30 who don't own a smart phone. If 95% of this age group owns a smart phone, the chosen segment will probably need to be reconsidered as only 5% of the chosen segment doesn’t own a smart phone.

On the other hand if the firm's marketing strategy involves persuading people to replace their smart phone it may be a suitable segment as 95% of the segment are the type of people likely to buy smart phones.

Segment suitability also includes the size of the segment. If the segment is too small, potential for sales growth will be limited. If is is too large, it will be difficult to create marketing activities to suit all of the groups included in the segment.

The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than seven feet.

4. Differentiable

The chosen segments should be clearly defined to avoid doubt about which part of the market, the firm's marketing activities are aimed at. Otherwise there is a risk that market activities will "spill over" into different segments. If there is more than one segment, you will need to assess whether each segment will require specific marketing. For example if married and unmarried men behave similarly when purchasing shoes, there is little value in placing them in different segments.

The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.

5. Actionable

Effective programs can be designed for attracting and serving the segments. For example, although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment.