The market is a large place and an entrepreneur cannot just target the whole market else he might end up not reaching anyone. On this note, it is best to define your market and segment based on your products and/or services. The success of market segmentation depends largely on the structure of the market. Markets characterized by unsatisfied or previously unidentified needs are most suited for segmentation. In effect, segmenting must be viewed as one of several strategies.
The question then is, should the entrepreneur aim at satisfying a heterogeneous market demand with a limited product line? Or should he adapt his product or service to meet the needs of specific customer groups? The answer to this question will depend not only on the production possibilities of the business and the desire to satisfy its customer's demand, but also on the likelihood of other enterprises making a similar decision.
More so, there are many advantages of market segmentation. It can be especially useful to marketers whose limited resources prevent them from developing broad markets. By analysis the differences in the marketing response of the various segments, the manager will be better placed to draw up a realistic budget for his total Market. Segmentation also enables the marketing practitioner to produce what the customer actually wants.
Furthermore, market segmentation makes it possible for the marketer to know the appropriate time to step up his advertising efforts and promotional campaigns. Equally, concentration of efforts within a small area facilitates identification of golden opportunities for his firm or company.
For a small-scale businessman, limiting himself to a few market niches could enhance his competitive advantage. For instance, he could focus on the market fringe and serve it with maximum efficiency and profitablity by concentrating his limited resources on meeting the needs of selected niches. Also, the intensity of competition is likely to be less in niches than in segments or mass markets because some operators might not consider it worth their while to operate in certain niche markets.