Strategic and operational market segmentation: a managerial analysis

One of the most widely used and familiar theories in marketing is market segmentation — the familiar protocols for the division of markets in a variety of ways into homogeneous groups of buyers, to form differentiated targets for marketing strategies and programmes. However, the view developed in this paper is that the conventional explication of this conceptual framework ignores some of the most critical issues faced in its use in practice. Uncovering these issues suggests the need to distinguish between ‘organizational levels’ in segmentation: the strategic compared with the managerial/operational; and, between the ‘internal’ and ‘external’ issues implicit and unavoidable in implementing segmentation strategies. This leads to the argument that segmentation models may vary in purpose and that segment targets should be evaluated not simply in the conventional terms of external market attractiveness, but also in terms of ‘internal compatibility’ with the structure and processes of the organization in question. Observations from practice suggest that refining and extending the scope of the market segmentation concept in this way is rich in implications for both practitioners and academic researchers. Our starting point is to re-examine the segmentation issue by addressing the concerns of practitioners as to the operational relevance of segment-based approaches by adopting a more holistic perspective on the segmentation issue. In this process of addressing operational relevance we identify a number of conceptual questions for marketing researchers and a diagnostic process for practitioners.