Some of the markets are large in size and their extensions in wide while other markets are very limited or narrow in size and extent. Consumer behaviour may also be a base for segmenting a market.
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Factors Affecting Market Segmentation
Following are the factors affecting market segmentation:
1. Nature of demand
A commodity having wide demand the extent and size of the market will be large and contrary to it the size and extent of the market will be Limited.
For example, Silver, Gold, sugar, and food-grains have a wide market while the demand for bangles, Gandhian cap, and Nehru jacket are limited to India only.
2. Durability
Perishable goods like vegetables, eggs, milk, bread, and butter have a limited market while durable goods namely T.V., radio, vehicles, gold, silver have a wide market.
Related: 23 Importance or Benefits of Market Segmentation (Explained).
3. Banking and Financial System
In a country where there is well developed organized money credit, banking and financial system are in existence the market is widened because payments are quickly finalized.
On the other hand, if the banking and financial system is not well developed and organized the markets Limited.
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4. Portability
The goods having heavyweight and prices are low the market is limited while those goods which are easily portable and prices are high have the large size and extent of the market.
Thus, Bricks, cement other building materials have a small size and extend market while silver and gold have a large size and extend the market.
5. Piece of and Security of Life and Property
If there is peace in the country and life and property are protected by the government the business activities will increase in the market is widened.
If there is no internal peace and security in the market is limited.
Related: 12 Qualities of Effective Leadership in an Entrepreneur.
6. Cognizability
A commodity is easily known on the basis of its quality by the consumers it will be demanded more and the size of the market is widened while in the absence of recognizability of a product buyers will not demand more and market will be Limited.
factors influencing market segmentationEngine mark mustard oil, postman, etc.
Are well-known and the market will be large.
7. Sampling and Grading of Goods
Those goods which are bought and sold on the basis of the samples and grading the market will be wide while the goods not sold on the basis of samples and grading have a limited market.
Woollen clothes, food-grains, raw cotton etc. have a Wide market.
Related: 15 Importance of Entrepreneurship (in Modern Economy).
8. Adequate Supply
The goods and services having a flexible supply market will be widened and the goods having inadequate supply will have a limited market.
9. Efficient and Honest Businessman and Traders
The presence of efficient and honest Business and trading community encourage the business and trade to flourish and the market is widened.
Thus, While inefficient and dishonest Businessman and traders will adversely affect the business activities and the market is limited.
10. Substitutes
A commodity having substitutes in the market will have a limited market while no substitute commodity will be widely used and the size and extent of the market are widened.
Related: 8 Main Applications of Marketing Research (Explained).
11. Government Policy
Domestic and foreign trade is affected by government policy relating to exports and imports, license, protection, taxes, etc.
If these policies are restricting the trade then the market will be Limited and when there are liberal policies the market is widened.
12. Availability of Means of Communication and Transport
In a country where there are cheap, quick, and adequate means of communication and transport available the goods are transferred from one part of the country to another and the market is widened.
Contrary to it the market is limited because goods cannot be transferred from one place to another.
Related: 14 Elements of Good and Effective Planning (How it work).
13. Division of Labour and Specialisation
The size and extent of the market are affected by the division of labour and specialization.
When the division of labour and specialization have used the production of goods is carried on the low cost of production and the cheapest will have large size market.
Thus, Contrary to it the market for dearer goods will be small.
14. Multi Uses
A commodity is used for various purposes the market of such commodity will be large and the commodity used for single use only will have a limited market.
Related: Top 12 Techniques of Decision Making (Step by Step).
15. Market Dynamics
Does market lend itself to a highly concentrated market or a more fragmented market?
How does this affect the expected market share a company could be expected to win in the short and long run.
Thus, All these factors play an important role in the market size and are factors to be aware of when thinking about sizing a market, As they can help guide you on the best approach to take for a given market.
Thus, now you know the factors affecting market segmentation.
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