LEVERAGING MARKET SEGMENTATION FOR SUSTAINABLE COMPETITIVE ADVANTAGE OF SERVICE FIRMS: A CASE OF VEHICLE HIRE COMPANIES IN KAMPALA UGANDA.

Abstract

In highly competitive markets, achieving sustainable competitive advantage is vital for the survival and growth of service firms. This study examined the relationship between market segmentation—focusing on psychographic and behavioral dimensions—and sustainable competitive advantage among vehicle hire companies in Kampala, Uganda. Guided by the Market-Based View (MBV) and Resource-Based View (RBV) theories, the study employed a cross-sectional quantitative design. Data were collected from managers and directors of 36 vehicle hire companies using structured questionnaires, and analyzed using correlation and regression techniques. The findings reveal a significant positive relationship between market segmentation and sustainable competitive advantage (r = 0.840, p < 0.05). Psychographic segmentation showed a moderate but significant effect (β = 0.333, p = 0.008), indicating that aligning services with customer lifestyles, values, and preferences enhances differentiation and cost advantages. Behavioral segmentation exhibited a stronger effect (β = 0.548, p = 0.000), underscoring the critical role of customer loyalty, booking patterns, and readiness to buy in sustaining competitiveness. Both hypotheses were therefore rejected, confirming that segmentation strategies significantly influence competitive advantage in the vehicle hire sector. The study contributes theoretically by extending the application of MBV and RBV to Uganda’s vehicle hire industry and empirically by providing context-specific evidence from an under-researched sector. Managerially, it recommends adoption of customer relationship management systems, loyalty programs, and targeted psychographic strategies to strengthen market positioning. At the policy level, it highlights the need for supportive frameworks that encourage SME adoption of data analytics, customer protection, and fair pricing practices. Overall, the study demonstrates that leveraging psychographic and behavioral segmentation enables vehicle hire companies in Kampala to enhance differentiation, achieve cost advantages, and maintain sustainable competitive advantage.