Market segmentation involves dividing the total market into groups of customers with similar needs and wants. This allows retailers to customize their products, services, and promotional campaigns for each segment. Effective segmentation criteria includes segments that are homogeneous within themselves but heterogeneous from each other, substantial in size, actionable to identify customers, accessible to target, and measurable. Segmentation helps retailers with development of marketing mix, store location decisions, understanding customer behavior, merchandising decisions, and promotional campaigns.

1. MARKET SEGMENTATION
 Market segmentation is the process of dividing the
heterogeneous total market into small groups of
customers who share a similar set of wants.
 Segmentation helps the retailer to customize the
product/service and tailor its promotional campaigns.

2. BENEFITS OF MARKET
SEGMENTATION
 Development of Marketing Mix:
Segmentation helps a retailer in identifying the target
population.
 Store Location Decision:
Segmentation helps a retail chain in deciding
locations for its new stores.
 Understand Customer Behavior:
Segmentation helps a retailer to gain insight into
why the target group acts the way it does.

3.  Merchandising Decisions:
Merchandising is essentially the skill that decides
which items will go on the shelves.
 Promotional Campaigns:
Segmentation help the retailer in positioning itself in
the market. The upper income class, and middle and
upper-middle class consumer.

4. CRITERIA FOR EFFECTIVE
MARKET SEGMENTATION
 Homogeneous Within:
The customers in a segment should have similar
needs and wants and follow similar buying behavior.
 Heterogeneous Between:
The customers in different segments should be as
different as possible with respect to their needs and
buying behavior.

5.  Substantial:
The market segment or segments that a retailer plans
to target must be large enough and have enough
discretionary income to help the retailer to be
profitable.
 Actionable:
The segmenting dimensions should be useful for
identifying customers. It should be accessible to its
target customers.

6.  Accessible:
The target market segment must be reachable so as
to serve them effectively.
 Measurable:
The size, purchasing power, and the characteristics
of the market segment must be measurable.

7. TYPES OF MARKET
 A market is any group of existing or potential buyers
of a product.
 There are three major types of markets:
i. Consumer:
The consumer market includes individuals and
households who buy goods or services for their
own use.
Grocery and stationery items are among the
most common types of consumer products.

8. Industrial:
The industrial market includes individuals,
groups, or organizations that purchase products or
services for direct use in producing other
products.
Re-seller:
The re-seller market includes middlemen or
intermediaries, such as wholesalers and retailers,
who buy finished goods and re-sell them for a
profit.

9.  Consumer products can be sub-divided into four sub-
groups:
 Convenience Products:
Convenience products are products that are
purchased frequently but on which the consumer
is not willing to spend much time or effort.
 Shopping Products:
Shopping products are products that a customer
feels are worth the time and effort to compare
with competing products.

10.  Specialty Items:
Specialty products are consumer products that the
customer makes a special effort to purchase.
 Unsought Items:
Unsought goods are products that potential
customers do not yet want or know about.
A retailer has to understand the product class it is
dealing with in order to understand customers’
buying behavior and to be able to segment
markets.

11. DIMENSION OF SEGMENTATION
 A retailer must decide on product-market dimensions for
segmenting the market, which might be useful in
planning marketing strategies.
 Geographic Segmentation:
The market is divided into geographical units such
as nations, states, regions, countries, cities, or
neighborhoods.
 Demographics Segmentation:
The market is divided into groups based on
demographic variables such as age, religion, gender,
income level, social class, family size, occupation,
education level, and marital status.

12.  Psychographic Segmentation:
When a retailer segments markets based on
psychographic characteristics, it divides buyers
into different groups based on their lifestyle,
personality, or values.
 Behavioral Segmentation:
In this customers are divided into groups based
on the way they respond to, use, or know a
product.

13. CUSTOMER PROFILE
 Market research may be necessary to develop
customer profiles.
 The profiles help the retailer in understanding the
needs of the target segments and its shopping
behavior.
 Customer Demographics
 Family Decision Making
 Psychographics
 Purchasing Behavior of the Target Population

14. SURVEY OF BUYERS
INTENTION
 Information on requirements of its target segment
regarding choice of products, price they are willing to
pay, type of packaging they prefer, the promotional
mediums to which they are exposed, type of promotional
campaigns that will influence them.

15.  Retailers can collect information about this segment
on:
 Frequency of customer visit to store.
 Weekday/weekend shopping patterns.
 Store selection criteria: how they go about selecting
the store.
 Spending per visit: how much the customer spends on
an average during each visit.
 Planned vs. unplanned shopping: items purchased in
a planned way and impulse purchases.
 Store loyalty: do they patronize a few stores or shop
around for bargains.