Segmentation is a creative and iterative process, the purpose of which is to satisfy customer needs more closely and, in doing so, deliver sustainable competitive advantage for the company. It is defined by the customers’ needs, not the company's, and should be revisited periodically. The process is as applicable to business-to-business markets as it is to business-to-consumer markets. Both these markets consist of customers looking for the proposition that best meets their needs at a price they perceive as providing superior value for money. The process is designed to uncover exactly what these needs are and, therefore, what value proposition each segment is looking for. The process of segmentation also helps identify new opportunities, for products, services and markets. The importance of segmentation to any business should not be underestimated: market segmentation is the basic building block for effective marketing planning and should reflect a market/customer orientation rather than a product or service orientation.
Market segments offering the greatest opportunities will be those that are growing and profitable, in which companies can effectively meet their customers’ needs of today, or for which companies can develop their products or services to meet the needs of tomorrow. Following the selection of market segments to be targeted, companies can then develop focused marketing strategies. This planned approach to meeting the needs of customers’ helps companies to be proactive instead of reactive, enabling them to take advantage of market opportunities and gain competitive advantage.
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