Market segmentation is the first step in the process of segmentation, targeting and positioning (STP) (Ries and Trout, 2004). This is a process in marketing that entails division of customers into different groups that have unique characteristics. Customers with similar characteristics are placed in the same group. Marketing segmentation helps organizations to understand their clients. The process of market segmentation is founded on the argument that customers with the same characteristics exhibit similar response to marketing initiatives (Varey, 2002). Thus, market segmentation presents various advantages to Amazon. One advantage is that the firm will be able to identify the most effective marketing strategies for different markets. Market segmentation will enable Amazon to define and understand the characteristics of its customers.
Thus, Amazon will know the market approaches that can best appeal to different market segments. Market Segmentation will also promote efficient utilization of the firm’s resources (Market Segmenting, 2005). Marketing activities requires investment of resources. Amazon may end up spending a lot of resources on marketing activities that do not appeal to the market if the firm fails to understand consumers.Firms can use different strategies when segmenting their markets (McDonald, 2012). The five main strategies that a firm can use to segment there market include; psychographic segmentation, geographical, demographic and behavioral segmentation. Psychographic segmentation focuses on classifying customers according to their values and lifestyles.
This strategy focuses on the customers’ activities, attitudes, values and opinion and examines how these affects the purchasing judgment of the customers. Geographical segmentation entails the classification of customers according to the geographical locations. This strategy focuses of geographical factors such as climate and population. Geographical segmentation may classify customers according to cities; states, countries or regions. Demographic segmentation entails the classification of customers according to their demographic characteristics. These characteristics include nationality, gender, age, religion, education, income, family size and many other characteristics. Behavioral segmentation entails the classification of customers according to their behaviors. This strategy focuses on behavioral aspects such as brand loyalty, price consciousness, value consciousness and readiness to buy.