Market segmentation – a sure means to overcome the problems of being every thing to every body and more importantly, in the process, understanding and serving the right value to the customers as against always meeting the demanded volumes and yet short serving , when it comes to the fulfillment of customer requirements in terms of meeting their business goals.

New products, advertisement campaigns, sponsorships, customer relationship management initiatives and the like are important for the business but all of them deliver the desired impact when the same kind of attention is paid to the process of customer segmentation – the act of categorizing customers based on the their purchase behaviour, functional requirements and use of your products and services.

Focus on value creation and delivery
Segmentation creates focus. Focus on issues that are important for a given category of customers. It is a means of identifying the issues that are valued by a given segment and make a marketing plan to saturate the segment. Once done, you may find finer aspects with in the segment, which when addressed may improve the profitability of your firm. Finely segmented customer base provides you with drivers for improving profitability and market share.

Based on the maturity of the organization, segmentation starts with geographical grouping and gradually other useful ways of segmenting the markets are discovered depending upon the business pressures like competition in the industry, market share, profitability growth with or with out a proportional growth in capacities, sustained results over a period of time and loyalty from most profitable product line etc.

Different aspects on which customers can be grouped apart from their geographical locations are preferred distribution channels, preference for specific product or service, financial support required, application type and so and so forth.

A creative exercise
It is found that companies limit their segmentation exercise to geographies, size of customers (small, medium, large) and at the most to type of products purchased by the customers. When practiced this way segmentation at best is a way of categorizing – categorizing for reporting rather than for identifying a targeted group of customers which may drive current and future profitability. Segmentation is a much more creative exercise than what marketing and strategic managers in their routine activity make it look like.