A market includes large number of buyers with different interests, tastes, age, sex, habits etc. In case of a movie, some people like action movies, others may like romantic or horror etc. Segmenting a market is a kind of dividing and rue principle. This dividing is done through grouping of customers according to their preferences, tastes, habits etc. Philip Kotler explains market segmentation is subdividing the heterogeneous market into homogeneous subsection of market. Factors influencing market segmentation are:
Resource of the organization is the first factor comes under discussion. Segmentation is a costly process. It involves expenditure for conducting surveys, designing and implementing different market mix etc. If the organization has sufficient fund, it can go for a good segmentation. Otherwise undifferentiated strategy is desirable. The competition existing in the market plays yet another role in deciding the market segmentation. A marketer while taking any decision must look at the competitor’s policy. If the marketer enjoys monopoly, then there is no need of segmentation. But in a competitive market, marketer should understand competitor’s policy.
Product life cycle is another factor that determines the market segmentation. A product has different stages in its life such as introduction, growth, maturity, saturation and decline. During introduction segmentation cannot carry on as the market cannot collect required information. During growth and maturity segmentation is possible. But during decline there is no segmentation. Also the nature of product is a determinant of segmentation. In the case of homogeneous product no segmentation is essential. It will be consumed by all classes of consumers. But for heterogeneous products, segmentation is necessary. The example of heterogeneous products is the clothing industry has segmentation such as kids, men, women, wedding etc. The nature of market is another factor too. If the market is sufficiently large and consumers have different taste and preferences, market should be segmented. In the case of small scale market undifferentiated policy will be successful.