What are the Requirements and Limitations of Market Segmentation or Target Marketing.

Requirements/ qualities of good segmentation as listed below-
As Market Segmentation involves grouping the customers in a market, it is essential that each segment should have certain characteristics to be called a Segment. In order to have effective segmentation of markets, following characteristics should be considered.

1) The segment should be identifiable and measureable in terms of size, purchasing power, etc. The target customers and the non-customers should be clearly defined for proper analysis. There should be data for doing meaningful analysis.

2) The segment should correlate to the organisations objectives and mission.

3) Organisational capability and resources should exist to serve the segment. A segment can be attractive but the organisation should have the resources, capabilities and capital to invest for the segment.

4) The segment should be growing. The Market segment should be profitable or should have the potential to meet the organisations objectives over a long period. The buyers in the segment should be willing to spend for the offering/ product. There should be demand in the segment.

5) The segment should be effectively reached and served. It refers to overcoming different barriers that external environment offers – political, geographical, etc.

6) The segment selected should respond uniquely to the selected marketing mix. Each segment selected should respond differently to a marketing mix strategy. Else the segmentation done is not adequate and incorrect.

Limitations of Market Segmentation or Target Marketing.
1) Complex markets require more than one segmentation variable to segment the market.For example, dividing the market solely on demography may be insufficient. Further study on psychographic variables, etc. may be required.

2) Some of the variables like lifestyle, personality are hard to identify and analyse. The segment should be identifiable and measureable in terms of size, purchasing power, etc. The target customers and the non-customers should be clearly defined for proper analysis. There should be data for doing meaningful analysis.

3) The segmentation process may be time consuming based on the many segmentation variables in the market.

4) Opportunities identified may require additional resources in the organisation. The organisation may not have the capabilities in terms of capital investment, skilled staff, etc.

5) Segment should be reached by the Marketing mix variables. The segment should respond uniquely to the marketing program designed for that segment. Each segment differs from the other, hence the marketing efforts are designed differently for each of the segment. If the response is not unique the marketers need to carry out the market research again or align the segment with the other segment. The marketers may need to do further research based on other variables. New segment product launch may require investments that increases the cost. The organisation should have the potential to cover the production cost, promotion cost, management cost, etc.

6) The identified segment should be able to sustain for a period so that the objectives of the organisations are met. For example, costs, social commitments, profits, brand image, etc.