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Market Segmentation Evaluation Criteria Example One
In the following example, we have considered two different furniture manufacturers. Both of these firms have conducted a market segmentation exercise and have created four market segments. As you will see, the first example will generally meet the criteria for effective segmentation.
However, the second set of market segments fails the evaluation test on a number of points. Therefore, the second furniture manufacturer will need to revisit their market segmentation process.
Defined Market Segments for Firm One
| Segment | Definition |
|---|---|
| First homers | Young couples establishing their first home, looking for a range of low-priced furniture |
| Busy families | Families with children at home, needing furniture that is durable, functional, and safe |
| Simply the best | Consumers that are very focused on their homes as a display of status, and prefer expensive and high-prestige brands |
| Design focused | Consumers who are very attracted by the look and style of furniture – may be attracted to both expensive and budget items |
Defined Market Segments for Firm Two
| Segment | Definition |
|---|---|
| Heavy users | Consumers who regularly upgrade and change their furniture |
| Light users | Consumers who only buy furniture every few years |
| Retirees | Looking for either budget furniture (because of limited income) or expensive furniture to enjoy their retirement years |
| Rural people | People who live out of the city regions |
To identify why Firm One’s segmentation outcomes are more appropriate than Firm Two’s approach, let’s work through each of the segments against an evaluation criteria as shown in the table:
| Evaluation Criteria | Firm One’s Segments | Firm Two’s Segments |
|---|---|---|
| Homogeneous | Seems to meet this evaluation test quite well, as each segment appears to have been grouped around similar needs. | Does not meet this first test. For example, in their retirees market, they have described the consumers as either being budget conscious or possibly the opposite. Therefore, this segment does not contain consumers with similar needs. |
| Heterogeneous | Looks good here as well, with each defined segment appearing to be significantly different in furniture needs. | This test is a major concern as well. For example, the “rural people” segment could also be allocated to any of the other segments, so there are insufficient differences between the segments. |
| Measurable | Would probably meet this test of being measurable. | Would probably meet this test of being measurable. |
| Substantial | Most of these segments would probably be substantial enough. | Most of these segments would probably be substantial enough. |
| Accessible | Would probably be able to utilize different media and distribution channels to access these different segments. | This may be of concern. For example, it would not be clear how you could directly access heavy users as opposed to light users. |
| Actionable/Practical | We may assume this to be the case, as we do not know much about the firms – typically we would assess this point against the firm’s capabilities. | We may assume this to be the case, as we do not know much about the firms – typically we would assess this point against the firm’s capabilities. |
| Responsive | Given the needs of each segment appear to be distinct, then different styles of furniture products (and supporting marketing mix) could be developed that would be more/less attractive to each of the segments. | This would also be a concern as some of the segments have been defined quite generically, such as rural people, so it is unclear whether they would respond to a distinct marketing mix offering |
As demonstrated in the discussion in the above table, Firm One’s market segment development appears to meet all the necessary criteria. This means that the segments are valid and the process of evaluating the segments and then selecting target markets can continue. However, Firm Two’s approach has failed a number of evaluation tests, particularly in regards to being homogeneous (generally similar in need) and being heterogeneous (each segment having distinctive needs). In this case, Firm Two would need to repeat their market segment development process in order to find a more suitable set of segments for their consideration.
Example 2: Healthy Snack Food Manufacturer
Background:
A healthy snack food manufacturer has recently expanded its product line to include organic chips, protein bars, and low-sugar fruit gummies. They’ve created four segments based on their consumer research:
- Active Achievers
- Definition: Health- and fitness-oriented consumers who are very conscious about protein, calorie intake, and nutritional balance.
- Needs: High-protein, low-fat, low-sugar snacks that support an active lifestyle.
- Busy Parents
- Definition: Parents with limited time who want convenient snacks for both themselves and their children.
- Needs: Quick, nutritious options that are kid-friendly, portable, and relatively affordable.
- Eco-Organics
- Definition: Consumers who prioritize organic certification, sustainability, and minimal environmental impact.
- Needs: Snacks made from organic, ethically sourced ingredients, possibly local produce, with eco-friendly packaging.
- Bargain Seekers
- Definition: Price-sensitive shoppers who look for deals and sales, aiming to keep overall grocery costs low.
- Needs: Affordable snacks, often in bulk or multi-packs, with less concern for organic or premium ingredients.
Now, let’s apply the evaluation criteria:
- Homogeneous:
- Each segment here shows a clear, shared characteristic. Active Achievers all want high-protein snacks; Busy Parents are primarily driven by convenience; Eco-Organics care about certified organic and sustainability; Bargain Seekers are highly price-focused.
- Verdict: Good. Each group is internally consistent in needs.
- Heterogeneous:
- Active Achievers differ from Busy Parents in their focus (performance vs. convenience). Eco-Organics might still be willing to spend more but care deeply about sourcing, while Bargain Seekers prioritize cost.
- Verdict: Strong differences exist among the four groups, indicating good heterogeneity.
- Measurable:
- The firm can track sales through health stores for Active Achievers, family-oriented channels for Busy Parents, organic-focused retailers for Eco-Organics, and discount supermarkets for Bargain Seekers. Additionally, external data like gym memberships or family-size households can help approximate potential segment size.
- Verdict: Likely measurable through standard retail data and market research.
- Substantial:
- Each segment shows a considerable consumer base: fitness enthusiasts are growing, busy parents are a large demographic, the organics market is on the rise, and bargain shoppers are always a significant portion of the market.
- Verdict: These segments are likely substantial enough, although the firm would quantify exactly how many consumers they can capture in each.
- Accessible:
- Distribution: High-protein products in gyms, sports stores, or online subscription services for Active Achievers; supermarkets and parenting blogs for Busy Parents; specialized organic stores and eco-focused e-commerce for Eco-Organics; big-box or discount retailers for Bargain Seekers.
- Promotion: Tailored channels—sports influencers, parenting magazines, environmental forums, and coupon apps—are available.
- Verdict: Feasible to reach each segment using different retail partnerships and marketing channels.
- Actionable/Practical:
- The company’s production facility can easily tweak formulations (protein levels, organic certifications), packaging (family-size vs. single-serve), and pricing structures (premium vs. discount lines).
- Verdict: The firm can create specialized product lines and promotions, so it’s actionable.
- Responsive:
- Active Achievers will likely pay more for protein-rich bars, Busy Parents might respond to convenient snack bundles, Eco-Organics may be drawn to ethically sourced ingredients, and Bargain Seekers will appreciate discounts or loyalty programs.
- Verdict: Each of these segments is expected to respond better to a unique marketing mix than a generic “healthy snack” approach.
Overall Assessment:
- This segmentation approach meets all the criteria, suggesting it is well-structured and likely to succeed.
Example 3: Boutique Travel Agency
Background:
A small travel agency specializes in unique vacations and has crafted four distinct market segments:
- Adventure Explorers
- Definition: Thrill-seekers who want experiences like mountain trekking, rock climbing, and white-water rafting.
- Needs: Physically challenging itineraries, expert local guides, some safety training, and a sense of discovery.
- Culture Enthusiasts
- Definition: Travelers seeking art, history, and cultural immersion (museums, festivals, culinary tours).
- Needs: Curated itineraries with local experts, behind-the-scenes access, multi-lingual support, immersion in local lifestyles.
- Romantic Retreaters
- Definition: Couples looking for intimate getaways, honeymoons, and anniversaries in serene or luxurious settings.
- Needs: Privacy, high-end accommodations, spa services, scenic locations, and possibly honeymoon/anniversary packages.
- Digital Nomads
- Definition: Remote workers who travel frequently, requiring good internet, long-stay lodging, and work-friendly cafes.
- Needs: Reliable connectivity, flexible booking options, coworking spaces, and a supportive digital-community environment.
Applying the evaluation criteria:
- Homogeneous:
- Each segment identifies a clear traveler profile with similar motivations. Adventure Explorers share a desire for physical challenge, Culture Enthusiasts seek deeper cultural engagement, Romantic Retreaters want couples-only experiences, and Digital Nomads require on-the-go productivity.
- Verdict: Each group is well-defined internally.
- Heterogeneous:
- An Adventure Explorer typically has different preferences from someone wanting a quiet, romantic beach resort. Culture Enthusiasts crave museums and historical sites, while Digital Nomads prioritize connectivity.
- Verdict: Strong differences, so the four segments are meaningfully distinct.
- Measurable:
- Data Sources: The agency can gather booking trends, surveys, credit card travel data, and even social media interests. For instance, customers who frequently post #TravelNomad might fit the Digital Nomad segment.
- Verdict: Reasonably measurable, albeit requiring some creative data collection for certain segments (like Digital Nomads).
- Substantial:
- Adventure and cultural tourism are growing sectors, romantic travel (honeymoons, couples’ retreats) is evergreen, and digital nomadism is on the rise.
- Verdict: Each segment can generate meaningful revenue for a boutique agency.
- Accessible:
- Distribution Channels: Partnerships with travel bloggers and adventure gear brands for Adventure Explorers; art forums, museum gift shops, and academic networks for Culture Enthusiasts; wedding shows and luxury spa platforms for Romantic Retreaters; remote-worker hubs and coworking communities for Digital Nomads.
- Promotion: Potential to leverage social media influencers in each category.
- Verdict: Each group has identifiable channels where they can be reached.
- Actionable/Practical:
- The travel agency can customize itineraries: adrenaline packages, culture-rich tours, romantic deals, or flexible, long-stay options with Wi-Fi enhancements.
- Verdict: Actionable. The agency has the operational capability to plan and market specialized travel experiences for each segment.
- Responsive:
- Adventure Explorers might respond strongly to adrenaline-focused marketing, Culture Enthusiasts might want curated guides, Romantic Retreaters desire luxury romance deals, and Digital Nomads could be drawn by flexible scheduling with guaranteed connectivity.
- Verdict: Each segment is likely to respond better to targeted offers than a generic travel package, confirming segment responsiveness.
Overall Assessment:
- This segmentation strategy meets all criteria, giving the agency a clear path to tailor and promote distinct travel experiences, each resonating with a different type of traveler.
Key take-aways
In both new examples—the healthy snack food manufacturer and the boutique travel agency—you can see how the same evaluation criteria (homogeneity, heterogeneity, measurability, substantiality, accessibility, actionability, and responsiveness) apply to entirely different industries. Effective segmentation remains crucial for firms that want to create offerings and marketing strategies that resonate powerfully with specific groups of consumers.
By comparing these additional scenarios with the furniture manufacturer examples, you’ll recognize that while the products, channels, and consumer preferences may vary, the underlying segmentation principles remain consistent across the board. Consistently applying these principles ensures you’re investing in the right segments, reaching them through appropriate channels, and ultimately generating sustainable, profitable growth for your business.