Market segmentation is about dividing potential customers into distinct subsets, and identifying different needs / benefits / qualities of those subgroups.

Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way and promoted in a certain way.

1.  Ability to buy (demographic)

2.  Willingness to buy (psycho-graphic, life style, beliefs, etc)

You want to be very, very specific about exactly the (a) location of our customer, (b) typical age of our customer (c) lifestyle of our customers...married, single, etc...(d) wealth of our customer, etc....  You need to get into the habit of considering that not all users are the same ….you need to think "is he worth talking to?".

see more in our discussion about market segmentation

Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives.

The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.

Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.

• homogeneity within the segment
• heterogeneity between segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable

These criteria can be summarized by the word DAMAS:

• D Differential: it must respond differently to a different marketing mix
• A Actionable: you must have a product for this segment to be accured
• M Measurable: size and purchasing power can be measured
• A Accessible: it must be possible to reach it efficiently
• S Substantial: the segment has to be large and profitable enough

The variables used for segmentation include:

• Geographic variables
  • region of the world or country, East, West, South, North, Central, coastal, hilly, etc.
  • country size/country size : Metropolitan Cities, small cities, towns.
  • Density of Area Urban, Semi-urban, Rural.
  • climate Hot, Cold, Humid, Rainy.
• Demographic variables
  • age
  • gender Male and Female
  • sexual orientation
  • family size
  • family life cycle
  • Education Primary, High School, Secondary, College, Universities.
  • income
  • occupation
  • education
  • socioeconomic status
  • religion
  • nationality/race (ethnic marketing)
  • language
• Psychographic variables
  • personality
  • life style
  • value
  • attitude
• Behavioural variables
  • benefit sought
  • product usage rate
  • brand loyalty
  • product end use
  • readiness-to-buy stage
  • decision making unit
  • profitability
  • income status

When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.