In order for one to successfully analyze the broad but specific topic that Market
Segmentation is, marketing and economics are the two core areas that ought to be
concentrated upon and conceptualized as they touch squarely on the topic. The
accompanying theories with which it comes will help us get a much clearer insight into
what marketing segmentation actually entails.
The theory of interest rates otherwise known as the segmented markets theory
argues that there exists an independence in the way short-term and long-term markets act
and that the maturity preferences of investors are fixed, and that there is a distinction in
the markets of short-term and long-term rates whereby each has its unique buyers and
sellers who are not interchangeable.
The second theory and which I find equally as important to this topic as the first
one is the theory of liquidity preference which sees investors as risk-fearing and as a
result will ask for premium for securities that take long to mature. The premium will
Increase at a decreasing rate as a result of downward pressure from the interest-rates
decrease in volatility while at the same time maturity-term increases. This further
aggravates the fears of the investors.
Market Segmentation would not be studied exhaustively without a look at its
relation with the labor markets theory or the neo-classical economic theory where buyers
and sellers compete openly with one another and where its functions are similar to those
of other markets. Workers would rather idle instead of working and there are differences
in human capital. Different jobs demand different qualifications and attract different pay.
Market Segments are identifiable from other segments due to their division into
parts of organizations and people with some or entirely same characteristics that make
them to ask for products, services and prices that are similar. This division into lots of
organizations and / or people with commonness in their needs forms the consumer group
This consumer group will equally have similarities in their demand for products, prices
and subsequently the function of these products. The above named characteristics thus
make the uniqueness of Market Segmentation from other segments: The division into
groups of consumers.
This segmentation has its positive as well as negative sides for the market in
terms of the different amounts the different consumer groups are charged. The
marginalization of minorities on racial lines, which has its basis on the labor markets
segmentation theory, sees to it that much as the market would like to pay the workforce
different wages for the same job and same qualification, it also should be prepared to put
up with different prices for the same item to these differently paid workers. This is a
classical case of skewed market segments that exist in the market.
Recognizing customer needs is very crucial in the market segment. This ensures
that the seller survives the turbulent waters of the ever changing market trends. The
different segments with different groups of buyers asks for different groups of different
sellers. The basis of this assertion is the theory of interest-rates. The situation in this case
therefore demands that products and services be tailor-made so as to suit the demands of
the customers. For example if a customer prefers short-term interest-rates then the seller
will have to comply and provide exactly what the customers demand from him or else he
will get out of business. This implies that for short-term interest-rates customers, give
short-term interest-rates and for long-term interest-customers, give long-interests.
The fact that labor market segmentation theory does not focus on the individual
but rather groups as an entity while the theory of liquidity preference focuses on the
Individual and his relation and interest rates in the market segmentation is a pointer to
how markets, economic and labor, function is an intricate web with various people with
varying interests but all managing to function together in a mutual relationship
Individuals interact with the structures of institutions in the market segments no
matter what their form of employment is and whichever their gender or race although
there are primary and secondary segments which are of great consideration in the entire
market segmentation set-up. These are basically the key points in the very crucial field of
market segmentation, together with its theories that keep it going and which whose study
makes us get an insight into how they interrelate, how interest-rates dictate the investors’
plans while venturing into the tricky affair that that the investment and job market is.
The segmented market is therefore a highly competitive market and survival
tactics ought to be devised and employed in every step depending on the kind of
customer one is dealing with failure to which the seller will close shop. The
categorization of customers and workers on the basis of race in the segmented market is
very unfair not only to the worker who gets a pay lower than his correctly colored
counterpart, but also to the seller himself. This hurts business besides reducing the market
segments into a man-eat-man society. All the same, Market Segmentation provides an
opportunity to competitive able and willing people to succeed.
Hillmet, (2002). Labor Market Integration and Institutions: An Anglo-German
Comparison; Work Employment Society.
Kuznets, (1955). Economic Growth and Income Inequality; American Economic Review.
Morrison, (1990). Segmentation Theory Applied to Local, Regional and Spatial Labor
Markets; Progress in Human Geography.
 Hillmet, (2002). Labor Market Integration and Institutions: An Anglo-German
Comparison; Work Employment Society.
 Kuznets, (1955). Economic Growth and Income Inequality; American Economic Review.
 Morrison, (1990). Segmentation Theory Applied to Local, Regional and Spatial Labor
Markets; Progress in Human Geography