A market consists of buyers who differ in terms of their needs, buying power, buying motives, buying attitudes and locations. Market segmentation recognizes this reality and divides the total market into distinct group of buyers having similar needs and characteristics. It is a customer-oriented philosophy.
Segmentation evolved along with the marketing concept. Marketing concept emphasized on customer orientations. Modern customer orientation concept is based on the following premises:
* Marketers must explore and understand the needs, desires, and preferences of the customers.
* They must develop, design, produce and market products and services accurately matching the needs, desires and preferences.
* They must match customers' convenience of buying with product availability; customers' costs with prices; and effectively communicate about the product's attributes and benefits through the media which customers are exposed to.
* The marketing mix should be designed to deliver the maximum product value and satisfaction to the customers.
* The firm should win customers' loyalty, retain the customer, and maintain long-term relationship with customers through public relation tools.
This emphasis of the marketing concept on the need to understand the needs, desires, and preferences of consumers and accordingly design marketing mix is a challenging task in marketing. It is not possible even for a very large company to understand the needs of all categories of people in the total market. Therefore, the marketing firms divide the total market into smaller market segments. Once the needs and priority of customers are properly understood, the firm can design appropriate marketing mix for the segments. The firm will be able to adequately satisfy customers and win their repeat purchase and loyalty. Overtime, the firm can develop long-term relationship with the loyal customers and gain revenue and profit of time from such customers.
