7 Criteria for Effective Segmentation

Market segmentation in today's business is a pivotal step for any firm. Following this step these segments must be evaluated against a set criterion.

Essentially, this review is an important checkpoint in the overall market segmentation, targeting and positioning process (known as the STP model/process). This analytical ensures that the resultant market segments are valid and usable for the firm's purposes.

The main goal of this stage of the STP process is to ensure that the market segments that have been constructed by the firm meet with basic requirements and guidelines, which will make them usable segments and potential target markets.

There're 7 criteria for effective market segmentation; in this article we're going to list these criteria, provide a brief explanation of each one and highlight why it's important. These criteria go as follows:

1) Homogeneous.

This means that the consumers allocated to each segment should be similar in some relevant way. Prospects in a single segments may share similar interests or in the same age group.

Its importance: This is the basis of market segmentation, that the consumers in each segment are similar in terms of needs and/or characteristics.

2) Heterogeneous.

Each segment of consumers should be relatively unique as compared to the other segments that have been constructed.

Its importance: This demonstrates that the consumers in the overall market have been correctly divided into sets of differing needs.

3) Measurable.

Some form of data should be available to measure the size of the market segment.

Its importance: Measurements are very important to be able to evaluate the overall attractiveness of each segment.

4) Substantial.

The market segment should be large enough, in terms of sales and profitability, to warrant the firm's possible attention.

Its importance: Each firm will have minimum requirements for the financial return from their investment in a market, so it is necessary to only consider segments that are substantial enough to be of interest.

5) Accessible.

The market segment should be reachable, particularly in terms of distribution and communication.

Its importance: Each segment needs to be able to be reached and communicated with on an efficient basis.

6) Actionable/practical.

The firm needs to be able to implement a distinctive marketing mix for each market segment.

Its importance: The range of segments identified generally need to be defined for the capabilities and resources of the organization, so very specialized segments may not be appropriate.

7) Responsive.

Each market segment should respond better to a distinct marketing mix, rather than a generic offering.

Its importance: The key outcome of the STP process is to develop a unique marketing mix for a specified target market, if the segment will not be more responsive to a distinct offering, then the segment can probably be combined with another similar segment.