With a call for a market-oriented approach to the provision of rehabilitation services (Patterson & Marks, 1992; Seekins, Mathews, Fawcett, Jones & Budde, 1988), rehabilitation providers need to recognize the diverse needs of consumers, and the heterogeneous nature of the rehabilitation market (Smith, 1956). They must be able to categorize consumers according to some of their definable characteristics and to tailor the market program for each category (May, 1985). This procedure is called market segmentation which is defined as "the act of dividing a market into distinct and meaningful groups of consumers" (Kotler & Clarke, 1987, p.233).
The basic proposition behind market segmentation is that within a total rehabilitation market there may be groups of consumers with similar wants and needs but whose wants and needs are different from other groups (Kotler, 1988). This gives rise to the notion that these smaller markets are internally homogeneous but externally heterogeneous. An analogy might be the existence of different kinds of fish in a habitat. Each type feeds on different nourishments. Some like smaller fish, some like worms, and others like shrimp.
Market segmentation involves three steps (Kotler, 1988). The first step is to identify segmentation variables, segment the market and develop profiles of the resulting segments. Using the same analogy, the fish can be categorized according to different characteristics, such as: type, feeding habit, size and locality. The second step involves the evaluation of the attractiveness of each segment and the selection of the target segment. The third step, called positioning, involves identifying and selecting possible promotional concepts for each target segment, and then developing and signalling the chosen promotional concept. It aims at distinguishing a service from competitive offerings in the mind of the consumer (Lovelock, 1987; Ries & Trout, 1981). Using the analogy again, some fishermen may want to catch all the fish they can. Others may only want to catch a specific kind of fish. Fishermen whose concern is mainly the quantity of fish caught may use bait that appeals to the majority of fish within the habitat. Those who want to catch only specific kinds of fish need to use bait that appeals to that fish. They also need to pay attention to other habits.
In the United States, the diffusion of the market segmentation concept in the health care market has been slow since its inception in the early 1960's. In the 1980's, the adoption of the concept has been stimulated by an increasingly competitive and rapidly changing environment (Finn & Lamb, 1986). An increase in health care segmentation studies reported in the literature throughout the 1980's reflects this trend (e.g., Berkowitz & Flexner, 1980-81; Boscarino & Steiber, 1982; Finn & Lamb, 1986). In a relatively recent study by Woodside, Nielsen, Walters and Muller (1988), the results of a national segmentation study confirm that consumers with preferences toward specific hospitals can be segmented into a few distinct groups, and each group or segment has a unique demographic profile.
The value of market segmentation and positioning as marketing tools has been reported in the context of both consumer goods and services (Hooley, 1978; Porter, 1985; Smith & Clark, 1990). Segmentation studies specific to the health care market have also been reported. Smith and Clark (1990) concluded from their study of images for hospitals and service centers that the traditional focus of health care management on undifferentiated markets and services is inadequate to reflect consumer perceptions within one health care market. McAlexander, Becker and Kaldenberg (1993) studied the impact of positioning strategy on financial performance of 264 general dentists in private practice and the results showed a significant different between positioned dentists and unpositioned dentists in their earnings. …