CHAPTER 10
Market segmentation
MARTIN EVANS
Chapter objectives
1 To show that, whereas the tradition of
grouping individuals together as far as possible
within relatively homogeneous segments has
been one of the major cornerstones of
marketing, that this paradigm has been
changing to more personalized and (attempted)
relational and one-to-one targeting.
2 To explore implications of the ‘the new
marketing’ and its collection, analysis and use
of personalized customer data, for
segmentation and targeting of markets.
3 To examine relevant dimensions of segmenting
and targeting, such as demographics,
psychographics and geodemographics.
4 To explore the fusion of personalized data
from a variety of sources which leads to
biographical segmentation.
5 To demonstrate the differences involved with
segmenting a ‘cold’ market and a current
customer base.
6 To explore aspects of targeting and positioning
within the segmentation, targeting, positioning
process.
Introduction
Over recent years, many marketers have been
party to and have certainly been witness to
some of the most dramatic changes in their
world. These changes have been in the area of
segmenting and targeting markets. This chap-
ter explores these developments along with
some of the reasons for them, and how they
have been manifested in new segmenting and
targeting practices.
The basic principle of market segmentation
is that markets are not homogeneous and that it
makes commercial sense to differentiate mar-
keting offerings for different customer groups.
The days when customers could buy a car ‘ in
any colour as long as it was black’ are long
gone. Markets have fragmented and technol-
ogy provides for greater variation in produc-
tion. Marketing itself can more easily identify
more and smaller market segments, and indeed
it can target selected segments more effectively.
In this respect, developments in the collection,
analysis and use of personalized customer data
have been a major driver of many of the
developments in the ‘new marketing’, and
these issues are discussed in this chapter.
In terms of structure, the chapter initially
provides a brief historical perspective on the
development of market segmentation, then
explores some traditional and conventional
criteria, categorization of and bases for segment-
ing markets. This is then followed by coverage
of the new data-driven segmentation and target-
ing approach. Here, the use of data technology
and ‘marketing metrics’ are demonstrated in
terms of how existing customer bases are being