Customer segmentation is the practice of dividing a customer base into groups based on shared characteristics, helping businesses identify unmet needs and optimize marketing strategies. It involves measuring profit potential, targeting profitable segments, and continuously adjusting approaches based on market conditions. Methods of segmentation include a priori, needs-based, and value-based segmentation, each with its own advantages and limitations.

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Consumer segmentation

2. Meaning
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 Customer segmentation(also known as market segmentation) is the practice
of dividing a customer base into groups of individuals that are similar in
specific ways relevant to marketing, such as age, gender, interests, spending
habits, and so on.
 Customer Segmentation is the subdivision of a market into discrete customer
groups that share similar characteristics.
 Customer Segmentation can be a powerful means to identify unmet customer
needs.
 Customer Segmentation is most effective when a company tailors offerings to
segments that are the most profitable and serves them with distinct
competitive advantages.

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 This prioritization can help companies develop marketing campaigns and
pricing strategies to extract maximum value from both high- and low profit
customers.
 A company can use Customer Segmentation as the principal basis for
allocating resources to product development, marketing, service and delivery
programs.

4. Objectives
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 To identify profit and market share maximizing strategy for each need based
customer segment to minimize :
 Over satisfying some customer segment needs (excess financial cost)
 Under satisfying others (market share cost)

5. How Customer Segmentation works:
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 Customer Segmentation requires managers to:
 Divide the market into meaningful and measurable segments according to
customers' needs
 Determine the profit potential of each segment by analyize the revenue and
cost impacts of serving each segment
 Target segments according to their profit potential and the company's ability to
serve them in a proprietary way
 Measure performance of each segment and adjust the segmentation approach
over time as market conditions change decision making throughout the
organization

6. Companies use Customer Segmentation
 Prioritize new product development efforts
 Develop customized marketing programs
 Choose specific product features
 Establish appropriate service options
 Design an optimal distribution strategy
 Determine appropriate product pricing
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7. Approaches to Consumer segmentation:
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 A priori segmentation : it is the simplest approach, uses a classification
scheme based on publicly available characteristics such as industry and
company size to create distinct groups of customers within a market.
 It may not always be valid, since companies in the same industry and of the
same size may have very different needs.
 Needs-based segmentation : it is based on differentiated, validated drivers
(needs) that customers express for a specific product or service being
offered.
 The needs are discovered and verified through primary market research, and
segments are demarcated based on different needs rather than characteristics
such as industry or company size.

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 Value-based segmentation : This type of approach differentiates
customers by their economic value, grouping customers with the same
value level into individual segments that can be distinctly targeted.

9. Limitations
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 We have not been able to provide a quantitative validation to our finding
because of non-availability of sales figures
 The changes in the brand equity as measured by us capture only a relative
measure and not an absolute score.
 Further, for the purpose of our study, we have categorised consumers into
three age categories namely <15,15-30 and >30 only.
 However we believe that the model is only a generalised framework and the
brand manager’s need to adapt it to the parameters as thought relevant by
them.

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