Market Segmentation and Performance: A Critical Review of the Literature and a Reconceptualization as a Dynamic Capability

Market segmentation has been at the cornerstone of strategic marketing for the last fifty years, aiming to adjust product and marketing offer to consumer requirements in order to gain “depth of market position in the segments that are effectively defined and penetrated” (Smith, 1956, p. 64). More recently, market segmentation is required to handle a very heterogeneous market and is plagued by implementation problems (Dibb 2001). Therefore an important question remains as to the role of market segmentation in the success of current marketing practices. Consequently, the objectives of this paper are to review the conceptual and empirical evidence on the link between market segmentation and business performance and suggest a new way of conceptualizing market segmentation – as a dynamic capability.