The Importance of Market Segmentation

by George N. Root III; Updated September 26, 2017

Market segmentation is the process of identifying your target demographics and then determining the best advertising mediums to reach that audience. Developing a focused marketing approach can increase your revenue and raise your marketing return on investment, according to the Center for Business Planning website. When you understand the importance of market segmentation, you begin to appreciate the value of precise marketing campaigns.

Understand Customers

To sell to your customers, you first must understand why they would want to buy your product. Market segmentation allows for the development of profiles of the many different kinds of customer groups who buy your products. You can use this information to create better marketing programs. It also can be used to develop products for your target audience.

Maximize Product Potential

Segmenting your market helps you understand how your product is being used by various customer groups. During the course of your market segmentation, you may come across an alternate use for your product that had not been previously discussed. You may discover a new market for your product.

Improve Distribution Network

Market segmentation assists companies in developing more efficient distribution networks. By studying the buying behaviors of various target customer groups, you can determine the way that customers prefer to buy your product. If customers prefer to buy online, you will want to focus on your online presence and reduce the resources you put into retail stores. Market segmentation also helps you identify geographic areas where your products are popular.

Gain New Clients

A comprehensive market segmentation analysis includes reasons why consumers are not buying your products. By understanding why the various market segments do not buy your products, you can alter your marketing or change your product development to try to gain new customers. It is important to have a balance when trying to gain new clients as you do not want to alienate and lose your existing customer base.

About the Author

George N. Root III began writing professionally in 1985. His publishing credits include a weekly column in the "Lockport Union Sun and Journal" along with the "Spectrum," the "Niagara Falls Gazette," "Tonawanda News," "Watertown Daily News" and the "Buffalo News." Root has a Bachelor of Arts in English from the State University of New York, Buffalo.