Consumer diversity is increasing rapidly and firms have long sought to differentiate their products relative to competitors. This is where market segmentation comes in. Long gone are the homogeneous markets that Henry Ford conquered with his mass production of one model of car (mass customisation is the new objective). While there has been a strong move towards one-to-one marketing in recent years, there are few examples of successful implementation, particularly in consumer markets. Market segmentation provides a proven way of disaggregating markets in a way that can improve profitability without the investment in systems and sales resources needed for one-to-one marketing. OBJECTIVES OF MARKET SEGMENTATION Market segmentation is the first of three important steps in developing marketing strategy. Segmentation groups customers with similar needs and responses; targeting determines which segments to serve; positioning is about how the product (or product portfolio) should compete with others in the market. The objectives of market segmentation are to more accurately meet the needs of selected customers in a more profitable way. Precisely how this can be achieved will vary by company capability. For example, a single product company may be able to boost sales and cut advertising costs if they can target consumers with a high likelihood of product purchase. On the other hand, a company with several brands in a category will benefit by positioning each brand within the portfolio against a distinct set of consumer needs -- ideally each brand should be sufficiently distinct so that there is little cannibalisation.
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