What Is Market Fragmentation?

Recall how Henry Ford established assembly lines to make it easier and more efficient to build standardized vehicles. Well, market fragmentation is the opposite of that concept. In other words, it avoids standardizing products to homogeneous groups and instead seeks to personalize them.

Market fragmentation, as it relates to market research, is important because it happens in every industry, both domestically and globally, and can determine brand positioning, marketing strategy, and product development.

Defining Market Fragmentation

Market fragmentation is the concept that all markets are diverse and over time break into distinct groups of customers (i.e., fragments)—especially as markets grow. For example, when an entirely new product is created, until consumers can spend enough time with it, it solves the needs of most early adopters. As more customers adopt the product, however, the need for more unique product features, benefits, and other aspects arise.

The line between market fragments and segments is blurred. However, something could be said for the fact that consumers fragment themselves whereas businesses segment consumers. Further, fragments are typically specific to products and services while segments can define other activities.

Why Is It Important?

Market fragmentation can be a great thing for customers and some business, but not so great for others—depending on the situation. Spotting a fragment before the competition does can give a business a competitive edge—and if they can address consumer needs first, they may be more likely to increase brand loyalty. Other advantages of market fragmentation include

• Increased market competition
• Lower entry to a market
• Greater differentiation in the market
• Lower marketing expenses

Some brands still choose to appeal to the masses, but market fragmentation can make that difficult and lead to disadvantages when it comes to mass marketing efforts and achieving brand loyalty. As a result, market fragmentation can pose more of an obstacle for larger companies, or those with a greater market share. Smaller companies that focus on distinct fragments can focus their efforts on building relationships with a unique set of consumers—and making those consumers feel special.  

So whether market fragmentation is good or bad depends. We argue it’s more often good. It can increase competition, innovation, and the personalization of products. But it can be a challenge for brands who don’t know what market fragments to go after or those that don’t have the means to do so—but there are solutions to help with that. Market research provides the means to identify and hone in on a fragment and understand their specific preferences and habits as compared to the rest of the market. Marketing can then take this information to micro-target or adopt advertising with specific elements that appeal to their fragment in question.

Download the infographic below to see an agile solution that provides tangible answers that enable you to build products and content that speak directly to your evolving consumer fragments.