What are the potential disadvantages of segmenting a market too much?
There are two major potential dangers connected to segmenting a market too much.
First, it is possible to lose out on some potential customers. If a firm segments its market too much, it runs the risk of excluding people who would actually be likely to buy. In other words, in trying to make fine distinctions, it may lose the chance to market itself to some customers.
Second, and perhaps more importantly, excessive segmentation leads to excessive costs. If a firm segments the market more than it needs to, it is adding to its costs. It has to spend money determining how to segment the market. Then it has to create different marketing strategies for each segment. This costs money as well. If the segments are not really distinct from one another, the firm may well be spending money that it did not need to spend. It might have been able to appeal to two or more of the segments it has identified with the same marketing campaign. By making separate campaigns for segments that do not need separate campaigns, it is wasting money.