What should be the Criteria for Market Segmentation?

There is no right or wrong way to segment a market. Consequently marketers are always developing their own approaches to segmentation because each market must be approached from the perspective of their own organization.

Criteria for segmentation
The rule for segmentation are easy to accept as they are simply common sense. Always remember that while the marketer is trying to identify a segment which matches the product or service being offered, a profitable outcome is also required which means that the segment must meet the following criteria:

• Identifiable:It must be capable of being identified as a separate section of the overall market and must display some common characteristic which sets it apart from the overall market.

• Recognizable:Do the members of the segment recognize themselves as being different and do other organizations in the chain of distribution recognize the segment? If neither the buyers nor those who serve  them recognize the segment it is unlikely to be a successful option. It is more likely to be a segment created in the mind of a person who believes strongly in the benefits of a particular product but remember this not true marketing - it is product-led marketing.   

• Substantial:It must be large enough to warrant activity on the part of the marketer. In the extreme example just given, the woman with green hair could not be described as a substantial segment.

• Profitable:It must be capable of achieving the desired objectives. This may not be in financial terms. Segments can be identified and used as a means of entering a market even though they produce little or no profit. This type of situation is often found in international marketing if an organization just wants to get a presence in the marketplace for some reason or other. A segment, which produces little profit, can also be chosen as an investment because of potential add-on sales at a later date.  

• Accessible:The marketer must be able to reach the segment. It is no good identifying a potential segment if you cannot serve it because of government regulations or locations, etc.

• Measurable:You need to know the size if the segment before, during and after your activities. If you cannot measure, you cannot assess your success. Someone once said "If i cannot measure it, I cannot manage it", and this is very true. 

• Reliable or Stable:The chosen segment must demonstrate a history and a future. If a segment suddenly appears, say because of a fashion fad, it may not be either stable or reliable. Unless the organization is able to move quickly and satisfy the immediate need, the segment may disappear just as quickly.   

• Sustainable:The organization must be capable of serving the segment in the longer term. It is pointless Identifying a segment which is so big that it is impossible to maintain. All this will do is to create dissatisfied customers and wonderful opportunities for competitors to come along and take the segment over - with the resulting losses of investment and effort for the original organization.

Another aspect which should be considered is whether the segment fits with the company image and objectives. For example, a company which sells high quality goods and relies on brand image would be unwise to suddenly start marketing to a lower income group. The company could lose their credibility with the loyal customers they have in the higher rice bracket which might mean greater losses than the income derived from the new segment.   
A good Market Segmentation will result in segment members that are internally homogeneous and externally heterogeneous, i.e, as similar as possible within the segment, and as different as possible between segments.
   

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