4 Key Points of Market Segmentation: Weighing the Risks and Rewards

Let’s say you run a successful company selling unique baseball caps for men. You have a proven business model that works for you. You now want to expand into the female market segment.   
When implementing segmentation strategies there are four key points to consider. 

1. Consumer Preference Heterogeneity

Consumer Preference Heterogeneity

Know that not all consumer tastes are the same and that as the diversity of preferences increases, the case for segmentation increases.  

2. Majority Fallacy 

Majority Fallacy

Be aware that the largest segment of a market is not always the most profitable, this is due to the intense competition. Smaller segments can be more rewarding because there is less competition.

3. Sales-Cost Trade-Off 

Sales-Cost Trade-Off

Recognize that as market segmentation increases sales increase. however, costs also increase because it is more expensive to apply a multi-product strategy. 

4. Cannibalization 


Understand that if products that are very similar are offered by the same firm, it is possible that the products will compete among themselves.

A new market segment that has become popular recently is the millennial mom segment. As you shop online, you may have noticed that many consumer reviews come from mothers that are extremely connected through social media. A prospective segmentation strategy that can be applied to successfully reach this new market would be to divide the market based on psychographics. By understanding the consumer’s lifestyle, attitudes, beliefs, and social values; products and marketing strategies can be customized to provide maximum value to the target audience.

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