Market segmentation and diversity are complementary concepts. Without a diverse market place, composed of many different peoples with different background and countries of origin, different interests, different needs and wants, there would be little
reason to segment markets.
Before the adoption of the marketing concept, mass marketing (offering the same product or marketing mix to everyone) was the marketing strategy most widely used. Market segmentation followed as a more logical way to meet consumer needs. Segmentation is defined as the process of dividing a potential market into distinct subsets of consumers with a common need or characteristic, and selectin one or more segments to target with a specifically designed marketing mix. Besides aiding the development of new products, segmentation studies assist in the redesign and repositioning of existing products and in the creation of promotional appeals and the selection of advertising media.
Because segmentation strategies benefit both marketers and consumers, they have received wide spread support from both sides of the marketplace. Market segmentation is now widely used by manufacturers, retailers, and the non-profit sector.
Nine major classes of consumer characteristics serve as the most common bases for market segmentation – geographic factors, demographic factors, psychological characteristics, psychographic characteristics, sociocultural variables, use-related characteristics, user-situation factors, benefits sought, and hybrid forms of segmentation (e.g. demographic / psychographic profiles, and geodemographic factors). Important criteria for targeting market segments include identification, sufficiency, stability and accessibility.
Once an organisation has identified promising target markets, it must decide whether to pursue several segments or just one segment. It then develops a positioning strategy for each targeted segment. In certain instances, a company might decide to follow a counter segmentation strategy in which it combines two or more segments into one large segment.