Market Segments are Defined by Customer Needs

A market segment is not an abstract concept; it is a group of real customers who share common desires, needs, and buying patterns. The challenge and art of marketing is to identify the dominant characteristics within a customer population and then create a product that precisely satisfies the needs arising from those characteristics.

Factors That Create Market Segments:

Segments can be formed by a wide variety of customer preferences and requirements:

• Product Characteristics: Performance needs (e.g., low-cost vs. high-performance), specific features.
• Capacity and Volume: High-volume customers have different supplier requirements than low-volume ones.
• Quality and Reliability: Some segments prioritize proven, reliable products over cutting-edge innovation.
• Distribution Channels: How and where customers prefer to buy.
• Brand Image and Trust: A preference for established, trusted brands vs. new entrants.
• Price Sensitivity: Willingness to pay a premium for features or service.
• Service and Support: The level of documentation, training, and post-sale support required.

A single customer can belong to multiple segments, and their behavior can shift. The key is to find a meaningful cluster of needs that is underserved and can be profitably targeted. This understanding is the first step in applying The Strategic Principle of Marketing.