1.2.3 Market Segmentation

Question 1

How does market mapping help businesses?

Answer 1

helps businesses to position their products/services by identifying gaps in the market

Question 2

Market map:

Answer 2

• a market map is a diagram that that illustrates the range of positions that a products can take in a market based on two dimensions that are important to customers
• it is also used to identify gaps in the market, which are opportunities where customer needs are not being met
• a market map will compare businesses based on two variables, such as price and quality

Question 3

Possible dimensions for market mapping:

Answer 3

• low price - high price
• basic quality - high quality
• low volume - high volume
• necessity - luxury
• light - heavy
• simple - complex
• unhealthy - healthy
• low-tech - hi-tech

Question 4

Benefits of market mapping:

Answer 4

• helps to identify potential gaps in a market (opportunities) → can lead tp development of new products that doesn’t have any competition in the market → sales increase
• helps businesses to identify and analyse their competitors/competition → so businesses will be able to change its product range → may lead to the business attracting new market segments
• supports market segmentation
• helps businesses to make decisions about marketing and positioning its brand
• encourages use of marketing research

Question 5

Limitations of market mapping:

Answer 5

• based on opinions and perceptions, rather than on accurate data
• compares businesses based on only two variables, which is simplistic
• can be difficult to identify the most appropriate variables
• just because there’s a ‘gap’ in the market doesn’t mean there’s demand for the product/service - there may be a gap for a reason
• market research is often not reliable as it is often not conducted as it is too expensive or, if it is completed, the data is frequently out of date or not relevant

Question 6

Steps to making a market-map:

Answer 6

1. Choose two variables
2. Research competitors
3. Get various opinions
4. Evaluate its usefulness

Question 7

Head-to-head competition:

Answer 7

• there doesn’t always need to be a gap in the market for a business to be successful
• businesses can target the same customers as other businesses and still succeed:
  
  • if there is enough demand in the market (enough customers)
  • if the business is able to meet customer needs better than its competitors (by offering more choice or better customer service)

Question 8

Market segmentation:

Answer 8

the process of dividing a target market into smaller categories by grouping together consumers with a particular need or interest

Question 9

Market segment:

Answer 9

a group of buyers with similar characteristics and buying habits

Question 10

What does segmenting a market allow a business to do?

Answer 10

segmenting a market allows a business to understand its customer needs and to target its customers better

Question 11

How can you segment a market?

Answer 11

• location/geographic e.g. Newcastle
• demographics e.g. a young couple, race, gender, age
• income e.g. socio-economic group
• lifestyle e.g. adventurous
• age e.g. 18-25
• gender e.g. female
• customer needs and wants
• how customers buy
• knowledge and experience of customers

Question 12

Main categories for market segmentation:

Answer 12

• Location/geographical
• demographics
• income

Question 13

Market segmentation: location/geographical

Answer 13

dividing a market into different geographical units, such as nations, regions, cities, neighbourhoods or other territories

Question 14

Market segmentation: demographics

Answer 14

• to do with population e.g. age, gender, race etc.
• dividing markets into segments based on demographic variables such as age, gender, family, lifestyle, religion, nationality, ethnicity etc.

Question 15

Market segmentation: income

Answer 15

dividing markets into different income segments, often on the basis of socio-economic grouping

Question 16

How do markets differ?

Answer 16

• customer needs and wants
• how customers buy
• location of customers
• knowledge and experience of customers

Question 17

Benefits of market segmentation:

Answer 17

• enables a business to identify their target market
• better matching of product to specific customer needs
• differentiate its products
• focus on a specific group of customers
• target its marketing activity develop a unique brand image
• build closer customer relationships
• helps with new product development – focused on needs of customers in the segment
• allows a business to grow its share in a market or to effectively target fast-growing segments
• helps make the marketing mix more effective e.g. better targeting of promotion

Question 18

Limitations of market segmentation:

Answer 18

• targeting a range of different customers with different products and services can be costly
• focusing on one group of customers can use a business to miss another opportunity
• customer characteristics change over time, such as lifestyle, income and demographics
• segmentation is an imprecise science - data is not always available, up-to-date or reliable
• just because a business can identify a specific market segment, it doesn’t mean it can successfully reach the customers in it
• markets are increasingly dynamic and fast moving; so too are the segments found within a market

Question 19

How does market segmentation allow a business to target its customers?

Answer 19

• location - means the business would target customers who are in a certain geographical location such as a town or region - leads to the business focusing on these customers by posting leaflets through their doors or using billboards on surrounding areas
• age - means they will target customers in a certain age group e.g. pensioners - leads to focusing on these customers by advertising in newspapers or magazines that they are likely to read
• income - means they will target customers in certain socio-economic groups based on what they earn - leads to creating a high end quality product that may be aimed at the highest earners
• demographics e.g. religion - means they will focus on making a product suitable fro a specific religion e.g. Christianity - leads to focusing advertising where the target audience may see it such as Christian tv channels/churches/Christian magazines etc.

Question 20

Income:

Answer 20

• socio-economic groups
• the amount of money you earn from employment or investment