Market Segmentation: Requirements, Methods, and Positioning Strategy

Posted on Dec 30, 2025 in Marketing

Understanding Market Segmentation

Market segmentation is defined as the process of dividing a heterogeneous market into homogeneous groups based on several common characteristics. This division allows for the application of a differentiated commercial strategy tailored to each group. The final aim of segmentation is to identify homogeneous groups within a large, heterogeneous market.

Key Dimensions of Segmentation

A Process: It develops through a series of sequenced tasks and actions.
Division into Homogeneous Groups: The goal is to bring together individuals within each group who exhibit common behavior.
Common Characteristics: Individuals in each group share characteristics that are easily identifiable.
Differentiated Commercial Strategy: Segmentation is performed to apply the most effective business strategy to each group, based on their characteristics and behavior.
Commercial Research Instrument: Segmentation serves as an instrument for commercial research.

Utility and Requirements of Segmentation

Segmentation provides the company with the possibility to differentiate its commercial interests and adapt to consumer tastes. Knowledge of the market allows the company to:

Discover new market opportunities for adapted products and services.
Optimize resources by allocating them more efficiently once new opportunities are identified.
Identify competition.

For segmentation to be truly useful and allow the company to differentiate its commercial activities, it must fulfill the following requirements:

Differences: Segments must differ in at least two behavioral characteristics.
Identifiable: The segmentation criteria used must be easily understood and measurable without problems.
Accessible: The determined segments must be accessible to the company, allowing the company to reach them with its resources.
Adequate in Size: Size is measured not by the number of individuals, but by their consumption capacity.
Profitable: The increase in sales must exceed the marketing effort made to differentiate the offer.
Stable: Segments must have a minimum duration over time to allow for a profitable investment.
Compatible: The segments targeted by the company must be compatible with each other, ensuring one segment does not completely undermine another.
Defensible: The diversification of the offering must provide a defensible advantage over direct competitors.

Segmentation Criteria and Process Steps

The Segmentation Process

The process involves the following steps:

Establish appropriate segmentation criteria.
Identify the most relevant variables for the study.
Gather relevant information.
Identify segments using appropriate techniques.
Describe the characteristics that identify and distinguish the components of the segment.

Classification Bases for Segmentation Criteria

Segmentation criteria are the classification bases used to group final consumers in a heterogeneous market into homogeneous groups. This approach can be divided into general and specific criteria, further categorized by objective and subjective data.

General Segmentation Criteria

These classification bases can be used for the division of any market, regardless of the product or service under investigation.

Specific Segmentation Criteria

These classification bases are used for the division of a market based on a specific product or service.

Objective Criteria: Consumption level, loyalty of use, buying habits.
Subjective Criteria: Expectations, Perceptions.

Specific Objective Criteria Details

Consumption Level: Based on the combination or independent use of two variables: quantity consumed and frequency of consumption. Users can be classified as heavy, medium, or light users, or as frequent, occasional, or non-users.
Loyalty: The market is divided into types of customers based on their fidelity:

Faithful: Those who rarely change their product.
Neutral: Those who change with ease but have proven some preference.
Unfaithful (Infidels): Those who change products with great ease.

Ways to Use Consumers do not use the products in the same way or under the same conditions (e.g., consumers who use crude oil only for cooking versus those who use it for skin care).Buying Habits Buyers are classified by the place and manner in which they purchase the product.

General Criteria Details

General criteria include Objective (quantitative, easy to measure) and Subjective (qualitative, difficult to measure) variables.

General Objective Criteria

Geographic Variables: These variables are easily understood and are based on the assumption that the area of residence influences needs. Important factors include nation, region, climate, and population nucleus type (urban, rural, or peri-urban).
Socioeconomic Variables: These variables classify the population based on the assumption that socioeconomic differences lead to differences in purchase and consumption behavior. The most important factors are income, education level, and profession.

General Subjective Criteria

Personality: The way individuals behave, determined by their personality traits (e.g., shyness, extroversion, apathy, activity), can be useful for classifying individuals based on their relationship with consumption and brands.
Lifestyle: Defined by how people interact with their environment based on a scale of values.

Specific Subjective Criteria Details

Expectations: The benefits sought by consumers from a product, and how these expectations influence their buying behavior and consumption.
Perceptions: Consumers’ perceptions of a product can be measured using surveys and analysis to group consumers based on their view of the product.

Methods and Techniques for Segmentation

Segmentation Methods

Methods used to analyze data and identify segments can be classified as follows:

A Priori Segmentation Methods: The researcher selects the segmentation criterion and the desired number of segments beforehand, utilizing various variables.
A Posteriori Segmentation Methods (Typology): The researcher analyzes the data first and then groups individuals based on similar outcomes.

Segmentation Techniques

Common techniques include:

Belson Method
Analysis of Variance
Cross Tabulations
Discriminant Analysis

Note: If a company wants to know which variables have the greatest discriminating power among market categories, Discriminant Analysis is often the ideal technique.

Typology Techniques

These techniques aim to identify groups of consumers by minimizing intra-group distance (difference between members of the same group) and maximizing inter-group distance (difference between members of different groups).

Application of Segmentation and Market Positioning

Segmentation Strategies

Once segments are analyzed and identified, the next step is to define the most appropriate marketing strategy. The company has the following alternatives:

Focus Strategy: Acting in a single segment with one product. Typically used by highly specialized small businesses.
Market Expansion Strategy: Acting in several segments with a single product, seeking growth by finding new markets for the existing product.
Product Expansion Strategy: Performing in a single segment with various products. The company specializes in a segment it handles well and offers different products, usually within the same line.
Differentiation Strategy: Acting on multiple segments with different products, adapted to the characteristics of each segment. This strategy requires great effort and significant resource allocation.

The Segmentation Continuum

Marketing strategies based on segmentation exist on a continuum:

Non-Segmentation (Mass Marketing): Offering the same product to the entire potential market. Used for widely distributed, low-involvement products.
Consumer-to-Consumer Segmentation (Relational Marketing): Offering products tailored to the needs of each individual consumer. Used for highly specialized products or services (e.g., financial services).

Market Positioning

The final function of the segmentation strategy is to determine the company’s position in the market.

The Positioning Process

Positioning involves defining the desired perception of the company, its brands, products, or services relative to competitors. The process includes:

Selection of the market segment where the company wants to position itself.
Identification and analysis of direct competitors (who they are and what they offer).
Establishment of the underlying criteria for determining the position (e.g., product dimension, brand image).
Analysis of the valuation consumers place on the company and competition (often via market studies, comparing the valuation with the product the consumer considers most appropriate).
Graphical representation of the valuation of the company and competitors on a positioning map.
Determination of the company’s strategic positioning (the position the company aims to achieve in the market).