Drawbacks of market segmentation

Market segmentation groups customers with similar needs, but targeting a new segment can bring drawbacks as well as opportunities.

Cost and neglect

Targeting a new segment can be expensive. You may need a new product, different packaging and advertising in places the new customers use. For example, a garden centre that mainly serves local families might target young renters with balcony plant kits. It would need smaller pots, new labels, social media adverts and staff time to set it up. Money and attention spent on the new segment may also mean existing customers are neglected, such as fewer staff on hand to help regular shoppers.

Small segments and wrong assumptions

A new segment may be small, so even interested customers may not buy enough to cover the extra costs. That can make it less profitable than the segments the business already serves. Segmentation also assumes that people in a segment have similar needs, and that assumption can be wrong. A cinema might target parents with toddlers at weekday screenings, but some want a quiet film while others want toys and activities. If the business treats the whole group as identical, the offer may suit very few of them.

Gaps can exist for a reason

Market mapping might show an empty space, but an empty space is not proof of profit. A gap may exist because demand is low or costs are high. A small town might have no late-night dessert delivery, but that could be because too few people order late and paying delivery drivers overnight costs too much. Targeting that gap could fail. A gap in the market may be there for a reason, so it needs checking before a business commits.