Segmentation Analysis

Segmentation analysis provides a means to understand and partition a broad consumer or business market into subgroups of consumers, such that a firm can effectively target specific sub-groups as segments with unique needs and wants rather than the market as a whole. Segments are created based on shared attributes of consumers or businesses such as shared needs, common interests, similar locations, common demographic profiles, etc. Segmenting a market allows a firm’s managers to understand and target segments that are most attractive for the firm. This chapter discusses the underlying theory, core idea, depiction, process, insight or value created, and risks and limitations of segmentation analysis. The chapter also continues the illustration of Harley-Davidson, and applies the steps of segmentation analysis to this case.