Marketing professionals often debate when to use market segmentation.

Some say it is a strategy that should be used when you have a large budget to target different audiences with different products and messages, while others argue that it should be an essential component of any company’s marketing plans irrespective of its size, product portfolio or market conditions.

To help you decide what’s best for your business, we will first look at what market segmentation is and then examine the conditions under which it may or may not be the right strategy.

when to use market segmentation
When to use Market Segmentation
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What is Market Segmentation?

We all know the saying “If you want to catch more fish, go where the fish are.” The same goes when it comes to marketing.

Market segmentation is the process of dividing a market into different groups of buyers who might respond differently to a product or service. It is used when companies want to understand and target specific groups of consumers rather than trying to appeal to the general public.

Segmenting a market allows businesses to focus their resources on specific areas, which can result in a more targeted and effective marketing campaign.

With Market Segmentation, businesses can also run differentiated marketing strategies to offer products or services that exploit the differences between target markets or segments.

When to use Market Segmentation

Here are the 5 factors to consider when deciding whether market segmentation is the right strategy for your business or not:

  1. Your product or service
  2. Your target market
  3. The size of your business
  4. Your budget
  5. The availability of skilled resources (e.g., employees with specific expertise)

 Let’s take a closer look at each of these. 

Your product or service

Is your product or service broad and generic enough to have the same appeal to everyone? In that case, market segmentation is probably not the best strategy for you.

However, if your product or service is more specialized or tailored to a specific group of people, then market segmentation may be a good way to specifically target those potential customers.

Similarly, if your product offers different benefits or value to different groups of people, segmenting your market based on benefits might be the way to go. 

Your target market

Who are you trying to sell to? Is there a specific group of people that you think would be interested in your product or service? Will different groups of people with different needs see different value in your product? If so, you may want to consider segmenting your market based on customer needs.

Another point to consider is how you price your product or service vis-a-vis your market’s ability to pay. If different groups of potential customers will be willing to pay different prices for your product, then why not charge more to those customers who will pay more?

This strategy, called Price Segmentation, is widely used by businesses like airlines and hotels to maximize their profits. You can do the same. 

The size of your business

Segmentation can be costly and time-consuming. So, if your business is still small it may not be the right strategy for you.

As a small business, you may not have the resources necessary to carry out a successful market segmentation campaign. In that case, it might be wiser to focus on reaching as many people as possible through mass or undifferentiated marketing.

Once your business begins to grow, you may be more able to justify the cost of market segmentation and the additional time it takes when compared with massive campaigns that reach out to all potential customers regardless of their needs or desires. 

Your budget

If you have a small marketing budget, market segmentation may not be the best option for you as budgets often need to cover a number of areas when targeting different audiences with different products and messages.

If money is tight for your growing business, you could consider a strategy like Aggregation Marketing where you would go through a segmentation exercise but then you would combine different segments and target them with a single marketing strategy.

If done right, Aggregation Marketing could give you some of the benefits of segmentation without ballooning your costs out of proportion. 

The availability of skilled resources

Is there someone in your business who has the necessary market insights and marketing expertise to carry out a segmentation exercise? If not, then you’ll need to invest resources into hiring people with that knowledge and skill set.

Attempting market segmentation without the right resources, can lead to a failed campaign and lost opportunities.


In conclusion, market segmentation is the exercise of dividing your potential customers into different groups based on certain characteristics and then designing marketing strategies specifically for each group.

In this article, we reviewed the various factors to consider when deciding when to use market segmentation (and when not to).

As with any marketing decision, there is no single answer that fits all businesses. You need to carefully assess your own situation and decide what will work best for you.

However, when done correctly market segmentation can lead to a product-market fit, satisfied customers, and higher profits for you.