The process of companies using market segmentation to appeal to their consumers is something that has not been utilized for a very long time.  However there has been discussion about market segmentations since the early 1900s.  In 1912, A.W. Shaw, one of the first business men to analyze markets, stated that markets should meet human wants more accurately than competition and that businesses need to treat economic and social markets as distinct ( ).  In other words, Shaw emphasized that fact that organizations cannot group different groups of people together in one lump sum, but instead need to more accurately give the consumers what they want.  However  Shaw failed to distinguish product differentiation from market segmentation.  Wendell R. Smith in 1956, professor and once president of the American Marketing Association, did make this distinction between market segmentation and product differentiation and pioneered the discussion of market segmentation.  Smith (1956) defined market segmentation as, “involves viewing a heterogeneous market as a number of smaller homogenous markets, in response to differing preferences, attributable to the desires of customers for more precise satisfactions of their varying wants.”  Smith suggested that bending the demand to the will of the supply and using market segmentation to adjust products and marketing efforts to these differences in demand would create more successful profit ( ).  Smith stressed the importance of finding out what the consumers want first, then differentiating products and marketing efforts to meet these desires.  Another marketing sales executive who discussed the importance of market segmentation was Mark Chamberlin in 1965.  Chamberlin stressed the importance of consumer perceptions and characteristics and recognized that differences in buyer preferences result in different demand curves ( ).  Because of this fact, Chamberlin suggested that organizations should adjust their products to the needs and tastes of different buyers to be more successful ( ).  Vijay Mahajan and Arun Jain, two analysts of marketing, looked at market segmentation in a little different light in 1978.  These two men looked at market segmentation as more than just a way to profit, but as a solid tool for research to identify and allocate resources among market segments ( ).  This suggestion even furthered the use and positives of companies using market segmentation to appeal to consumers.

            Since the 1900s, market specialists have formulated a more general and specific meaning of market segmentation.  Market segmentation can be broken down  as a subgroup of people or organizations sharing one or more characteristics that causes them to have relatively similar product needs ( ).   Or in other words, market segmentation groups customers with homogenous buying requirements into segments.  When businesses segment the market they are aiming to find a target market, or a group of people or organizations for which an organization designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges ( ).  Traditionally there have been established six basic steps in segmenting; 1. select a market or product category, 2. select segmentation basis, 3. select segmentation descriptors, 4. profile and analyze segments, 5. Select target market, 6. Design implement and maintain appropriate marketing mixes. 

            Companies know the importance of segmenting markets, but what bases do organizations use to put consumers into these segment groups and what constitutes as an adequate market segment?  Traditionally there are five different segmentation bases, or characteristics of individuals, groups, or organizations used to divide a market into segments.  The first widely used segmentation base is geography.  In geographical segmentation corporations separate consumers based on such things as location in a country or world, market size, market density, or climate.  The second segmentation base, which is often seen as most used, is demographics.  In demographic segmentation businesses segment based on things such as age, gender, income, ethnic background, or family background.  The third segmentation base is psychographic segmentation.  This segmentation puts consumers into groups based on factors such as personality, motives, lifestyles, or preferences.  The fourth segmentation base is benefits sought, where corporations segment consumers based on the benefits they seek from a product.  The final traditional segmentation base that corporations widely use is usage rate segmentation, which segments on the basis of the amount of product bought by various consumers.  With these five traditional segmentation bases, organizations can chose to focus on just one base, or combine numerous bases to try to meet a more specific group of consumers.  Once organizations pick their segmentation bases and their market segments they want to target, companies must determine whether their market segment is adequate for profit.  There are four basic criteria that must be established for a market segment to be successful: substantiality, identifiably and measurability, accessibility, and responsiveness.  For a segment to be substantial, the group must be large enough to warrant a special marketing mix and must be able to be profitable.  For a segment to be identifiable and measurable, the group must be identifiable and their size measurable.  For a segment to be accessible, a group must be reachable to the organization.  Finally for a segment to be responsive, the group must respond to some aspect of the marketing mix differently than other groups.  However, even if a particular market segment has all of these qualities, it does not necessarily mean that it will work well for a particular organization. 

            Organizations have been told for many years now to use market segmentation and have been told the basic steps of how to do it.  But why should businesses use market segmentation?  This tool is centered around the belief that consumers buy different products and have different preferences of these products.  So in order to deal with the heterogeneity of consumers, marketers focus on specific groups to balance the variability in customer needs with their available resources ( ).  In simple terms market segmentation helps marketers have better understanding of customer needs and characteristics, it allows companies to better allocate their resources, and helps businesses to gain competitive advantages over their customers.  When looking at how market segmentation helps corporations to better understand their customer’s wants and characteristics, marketers have shown that using market segmentation gives them a better look at the competitive situation ( ).  Using market segmentation businesses can identify groups to which individual consumers belong, predict how they will react to new products, identify which segments best fit an organization, and tailor their products to meet this particular segment.  When looking at how market segmentation  allows companies to better allocate their resources, segmentation allows businesses to balance their marketing activities that contribute to market share to profitability ( ).  This allows companies to look at different consumer groups, see which ones are most applicable, and focus their resources on these groups, which leads to the highest profits and lowest costs. Businesses know that they cannot satisfy the needs of all consumers, so companies instead concentrate their efforts and resources on groups with similar desires.  This aspect also helps out smaller businesses that have limited resources, best focus their assets on groups that will give them the most market share or best profits ( ).  When looking at how market segmentation helps businesses gain competitive advantages over their competitors, segmentation can help companies differentiate and specialize their products to meet what a particular group wants.  When they do this, companies have a product that is superior to their competition, and this creates a competitive advantage over their competitors. 

            Marketers segment their customers into groups, partly to help understand their customers better and make products that the consumers want.  However the problem with market segmentation is that it is a tool where the marketer views the market in they way they want.  As Michael Wedel and Wagner Kamakura (2002), business professors from the University of Michigan and Duke University, put it in their editorial entitiled “Introduction to special issue on market segmentation,” “segments are not homogenous groupings of customers naturally occurring in the marketplace, but are determined by the market manager’s perspective or strategic view of the market.”  In other words, the first priority of market segmentation is not to please every indivdual consumers wants and needs and to find the perfect groups to put consumers in, but is however used to first and foremost meet the wants and needs of the organization.  However even if marketers did put their consumers first and really tried to put customers in segments that met their needs, there is the underlying notion that not everyone is the same.  Just because a group of people are the same age or live in the same area, it does not mean that each person in one of these segments will respond the same to a product or want and desire the same attributes from a product.  Jock Bickert, author and market analyst, stressed this problem of market segmentation in his article called “Cohorts II: a new approach to market segmentation.”  Bickert (1997) discussed how people often try to generalize market segments and simplify them  in order to deal with the complexities of human diversity.  However because marketers tend to generalize and simplify their segments, as Bickert (1997) points out, they tend to rush their systems of analysis, which ends in a segment that does not explicitly represent every single person in their target market.  This problem brings up the question of whether or not marketers should actually segment their consumers into groups of similar attributes.  In fact, there is no real substantial evidence that shows one base of segmentation as superior or inclusive of the needs of every person in a specific market ( ).  This leads to the conclusion that perhaps marketers should either change their traditional outlooks on segmentation basses, or do away with segmentation as a whole.