Top 15 Factors Affecting Market Segmentation (With Examples)

Some of the markets are large in size and their extensions wide while other markets are very limited or narrow in size and extent. Consumer behavior may also be a base for segmenting a market.

factors affecting market segmentation
factors affecting market segmentation

Market segmentation is very important in a country’s economy for better year-by-year economic performance.

What are the Factors Influencing Market Segmentation?

The following are the factors influencing market segmentation:

1. Nature of Demand

For 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 caps, and Nehru jackets is limited to India only.

You can choose a suitable marketing strategy for market segmentation.

2. Durability

Perishable goods like vegetables, eggs, milk, bread, and butter have a limited market while durable goods namely T.V., radio, vehicles, gold, and silver have a wide market.

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 are Limited.

4. Portability

The goods that are heavyweight and priced low in the market are limited while those goods which are easily portable and priced high have a 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 market.

5. Piece of Security of Life and Property

If there is peace in the country and life and property are protected by the government business activities will increase in the market is widened.

If there is no internal peace and security in the market are limited.

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 the recognizability of a product, buyers will not demand more and the market will be limited.

Factors influencing market segmentation engine mark mustard oil, postman, etc. Are well-known and the market will be large.

7. Sampling and Grading of Goods

For 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.

Woolen clothes, food grains, raw cotton, etc. have a Wide market.

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.

There are many benefits of market segmentation.

9. Efficient and Honest Businessman and Traders

The presence of an efficient and honest business and trading community encourages business and trade to flourish and the market is widened.

Thus, inefficient and dishonest businessmen and traders will adversely affect 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.

11. Government Policy

Domestic and foreign trade is affected by government policy relating to exports and imports, licenses, protection, taxes, etc.

If these policies are restricting 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 the market is limited because goods cannot be transferred from one place to another.

13. Division of Labour and Specialisation

The size and extent of the market are affected by the division of labor and specialization.

When the division of labor and specialization have used the production of goods is carried on the low cost of production and the cheapest will have a 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 the such commodity will be large and the commodity used for single use only will have a limited market.

15. Market Dynamics 

Does the 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, these are the factors that affect the size of a market.

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