How do companies identify attractive market segments?

There are essentially two methods by which market segmentation can be achieved by a company:

1. Segmentation based on consumer characteristics and responsibilities- in this consumers are divided with segmentation bases- sex, age, lifestyle, family life-cycle, benefits sought,etc. The differences amongst the consumer groups are statistically tested. If there is significant difference amongst the consumer groups, each of the consumer group is analyzed for its detailed profile. this results into mutually exclusive market segments.

2. segmentation without a priori basis- here, we take a large sample ashed on their Demographics, psycho graphics, social, cultural, etc.The sample is put to factor Analysis for finding out factors that have common characteristics or responses. These factor-clusters become market segments.