Benefits of market segmentation

Market segmentation brings benefits because it lets a business aim at a specific group of customers with shared characteristics rather than trying to please everybody at once. That group can then become the target market, and every decision can be made with those customers in mind.

Aiming at the right people

A major gain is targeted marketing. Product features, price, promotion and place can be designed for one group, so the message feels as though it was written for them. This helps develop the brand, because a relevant message is remembered and repeat buyers start to trust it.

A focused campaign also reduces marketing costs. Money is spent where likely buyers actually are instead of on people who would never be interested. For example, a firm selling customised phone cases for 13- to 17-year-olds would put its money into social media clips and school-holiday promotions, not a national newspaper advert read mainly by older adults.

Understanding and keeping customers

Studying a segment helps a business understand the wants and needs of its target market, so it is easier to satisfy those needs because customers are better understood. That knowledge also sparks ideas for growth and improvement, such as adding a shockproof version after hearing that buyers drop their phones.

Customers whose needs are met properly are more likely to return, which raises customer retention. More sales and repeat custom can increase profits and profitability, and leading a segment can build market share.

Segmentation makes these outcomes more likely, but it does not guarantee them: a competitor may target the same group better, or the product may still be priced wrongly.