Mkt Segmentation Guide #11

In consumer market segmentation there is a maximum number of segments, say about eight, which can be considered and executed against by the marketer.

Segmentation, taken to its logical conclusion, would yield segments of one end-user eac because each end-user is unique.  Obviously, marketers cannot afford to customize their marketing mix for each individual end-user.  Marketers tend to seek segments that are large enough for them to achieve some economies of scale in their marketing efforts.

From experience, segmentation schemes of over about eight segments generally reduce the segmentation sample size in any one segment to a point where the estimators become unstable.  Thus, the confidence interval around an estimator, such as age, for a given segment tends to overlap to other segments.  The distinctions between the segments become unclear.

If marketers don’t clearly understand the characteristics of the end-users in a given market segment, it is impossible to effectively proceed with the other steps in marketing planning -- targeting, positioning, and developing marketing mix tactics.