ACCEPTANCE of the benefits of market segmentation is so pervasive that it seems almost sacrilegious to question the validity of this faith in the power of segmentation as a marketing tool. But, at the risk of being labelled heretics, we argue that segmentation is not the marketers’ nirvana it is sometimes made out to be. This paper discusses a number of assumptions and arbitrary decisions involved in the segmentation process, including beliefs about the selection of base variables, the analysis method chosen, the number and composition of segments, the validity of the solution and its stability over time. Techniques for assessing the reliability of the outcome are then reviewed, and we conclude that managers should be more aware of the limitations of segmentation studies.
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