A market segmentation analysis provides the fundament for companies to successfully identify market segments, and is also providing companies with the ability to evaluate the needs and wants of different market segments. When conducting a market segmentation analysis, companies will potentially also be able to discover new segments, market niches and business opportunities, and new ways of positioning their products to different audiences.

When having analyzed market segments, companies will therefore be able to tailor their marketing mix to specific customer needs and wants more directly, and thereby create a stronger presence within specific segments. This approach is often referred to as market positioning, in which companies are positioning themselves to satisfy the needs and wants of a homogeneous audience.

The differentiation of the entire market into smaller sub-segments makes the most sense for companies facing a market audience consisting of big differences between potential buyers, and for companies facing problems with getting market attention with one uniform marketing mix for all customers.

The analysis is all about segmenting the pool of buyers into uniform and homogeneous segments, with homogeneous needs and wants that are qualitative distinct from other segments. Likewise, each segment should be durable over time, and big enough to justify the marketing efforts put into getting their attention.

Below, some variables to consider in a market segmentation analysis are presented:

Geographic segmentation
Marketers should consider if there are some geographical variables that could have and effect on the needs and wants of differentiated customer segments. Geographic variables could e.g. consist of:

Country
State
Population density – Urban, suburban or rural
Type of neighbourhoods
Climate
Etc.

Demographic segmentation
Marketers should also consider the demographic variables like:

Age
Gender
Family
Education
Ethnicity
Income
Occupation
Etc.

Psychographic Segmentation
When analysing different segments for psychographic variables, marketers could look at some of the following variables.

Interests
Religion
Values
Culture
Opinions
Attitudes
Etc.

Behavioural segmentation
Marketers should finally analyze and identify the customers behavioural tendencies like:

Benefits sought
Usage rates
Loyalty
Slow or fast adopters of new products
Wanted ways of purchasing
Etc.

All the variables above are useful when identifying different markets segments, and may all act as a starting point for evaluating the different needs and wants of customers.

By doing this, as said, companies will potentially avoid getting stuck-in-the-middle, and be able to more effectively develop products and services that fully satisfy the differentiated needs of a wide and fragmented range of customer needs.

Many companies will however not have the sufficient organizational resources to cater to all identified segments, and many companies will have to select one or few segments to attack. In this situation, companies could evaluate its core competencies, and analyze in which segments these competencies would be appreciated the most. By doing this, companies may create a much stronger presence within few selected target segments, and thereby potentially boost customer loyalty, brand recognition and profits generated in these selected market segments.