What should be the first step in market segmentation?

Defining broad product-markets is a critical first step in market segmentation because it establishes the overall context in which the segmentation will occur. This process involves understanding the general needs and characteristics of the market you are targeting, which serves as a foundation for identifying specific segments.

By clearly defining broad product-markets, a company can better identify subsets of consumers who share similar needs or characteristics. This understanding informs the subsequent steps in segmentation, such as determining specific segments based on demographics, psychographics, or behavior. Without this initial definition, it becomes challenging to effectively evaluate customer preferences or segment the market in a meaningful way, as the foundational framework may be inadequate.

In contrast, conducting market surveys, analyzing customer preferences, and assessing profitability are vital tasks that follow the initial step of defining the market. They rely on the clarity provided by knowing the broad product-markets to yield useful insights and data for refining the segmentation process. Thus, starting with a solid definition anchors the segmentation strategy effectively.