Market segmentation is broadly defined as a complex process consisting of two main phases:

– identification of broad and large markets

– segmentation of these markets in order to select the most suitable target markets and develop marketing mixes accordingly.

Everyone in the marketing world knows and talks about segmentation, but not many really understand its underlying mechanisms, so failure is just around the corner. What Causes This? It has been documented that most marketers fail the segmentation test and start out with a narrow mind and a lot of misconceptions like “all teens are rebellious”, “all older women buy the same cosmetic brands” , etc. There are many dimensions to consider, and discovering them is certainly an exercise in creativity.

The most widely used market segmentation model included 7 steps, each one designed to encourage the marketer to take a creative approach.

STEP 1: Identify and name the broad market

By now, you should have figured out which broad market your business is targeting. If your business is already on the market, this can be a starting point; there are more options available for a startup, but resources would normally be a bit limited.

The biggest challenge is finding the right balance for your business – use your experience, knowledge, and common sense to estimate whether the market you just identified above is not too narrow or too broad for you.

STEP 2: Identify and inventory the needs of potential customers

This step takes the challenge of creativity even further, as it can be compared to a brainstorming session.

What you need to find out is what needs the consumers of the broad market identified above may have. The more possible needs you can think of, the better.

Have you been stuck in this stage of segmentation? Try to put yourself in the shoes of your potential customers: why would they buy your product, what could trigger a purchase decision? Answering these questions can help you list the most potential customer needs in a given product market.

STEP 3: Formulate Narrower Markets

McCarthy and Perreault suggest forming submarkets around what you would call your “typical customer,” and then adding similar people in this segment, provided you can meet their needs using the same marketing mix.

Start building a column with the dimensions of the main need you are trying to fill – this will make it easier for you to decide whether a certain person should be included in the first segment or should form a new segment. Also create a list of people-related characteristics, including demographics, for each small market that you form; an additional step will ask you to name them.

There is no exact formula on how to form narrow markets – use your best judgment and experience. Don’t avoid asking opinions from even non-marketers, as different people may have different opinions, and you can usually count on at least those points that most people agree on.

STEP 4: Identify the determining dimensions

Carefully review the list resulting from the previous step. You should now have a list of dimensions of need for each market segment – try to identify those that have determining power.

Reviewing the needs and attitudes of those you included within each market segment can help you determine the determining dimensions.

STEP 5: Name possible market segments

You have identified the determining dimensions of your market segments, now review them one by one and give them an appropriate name.

A good way to name these markets is to rely on the most important determining dimension.

STEP 6: Assess the performance of market segments

After you’ve finished naming each market segment, take some time to consider what other things you know about them. It is important for a marketer to understand market behavior and what triggers it. You may notice that while most segments have Similary needs are still different Needs – Understanding the difference and acting on it is the key to success using competitive offers.

STEP 7: Estimate the size of each market segment

Each segment identified, named and studied during the previous stages must finally be given an estimated size, even if, due to lack of data, it is only a rough estimate.

Market segment estimates will come in handy later, providing support for sales forecasting and helping to plan the marketing mix – the more data we can collect at this point, the easier planning and strategy will be.

These were the steps to segment a market, briefly presented. Done correctly and thoroughly, you should now be able to get a glimpse of how to create marketing mixes for each market segment.

This 7-step approach to market segmentation is very simple and practical and works for most marketers. However, if you are curious about other methods and want to experiment, you should take a look at computer-aided techniques such as grouping and positioning.