Market segmentation offers the following potential benefits to a business:
Better matching of customer needs: Customer needs differ. Creating separate products for each segment makes sense.
Enhanced profits for business: Customers have different disposable incomes and vary in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits.
Better opportunities for growth: Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being sold an introductory, lower-priced product.
Retain more customers: By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands.
Target marketing communications: Businesses need to deliver their marketing message to a relevant customer audience. By segmenting markets, the target customer can be reached more often and at a lower cost.
Gain share of the market segment: Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice for customers and distributors.
There are various methods (or “bases”) a business can use to segment a market.