Dissecting Market Segmentation

"Everyone from Australia is stupid."

It's a glaring statement and it's wrong. It is incorrect because it assumes that everyone in Australia is stupid. It makes a further assumption: that everyone in Australia is exactly the same. Obviously nobody, in their right mind, would ever utter or accept such a statement.

Yet when we turn to market segmentation, most companies make these kinds of idiotic assumptions on a daily basis. Market segmentation is one of the fundamental components in a strong marketing strategy. Most companies accept the fact that different people want different things and that, therefore, they should have different segments in their marketing plan.

The problem becomes apparent when we explore the criteria that most companies use to segment their market. Take a look at the names of the different segments in your company's market-segmentation pie chart. Chances are you will discover segments that are divided by age, by gender, by social class or, if you work in B2B, by turnover and SIC code. Dividing up the market by a combination of these factors is simple, cheap and it looks effective. Unfortunately, it rarely works.