2.3 Market Segmentation

Question 1

Market segmentation

Answer 1

• A process used to divide up the market or potential customers into groups known as segments

Question 2

What are segments usually based on? (4p)

Answer 2

• Location
• Demographic
• Lifestyle
• Income

Question 3

Types of demographics (5p)

Answer 3

Age
Gender
Race
Religion
Sexual orientation

Question 4

Benefits of segmentation (3p)

Answer 4

• Enables businesses to understand and meet needs of customers effectively
• Increased brand loyalty and repeat customers
• Reduces prices sensitivity around brand

Question 5

Drawbacks of segmentation (3p)

Answer 5

• Increased cost linked to research and product development
• Potential for brand to lose its identity
• Additional marketing required

Question 6

Market segmentation benefits (6p)

Answer 6

• Better matching of customers needs
• Enhanced profits for business
• Better opportunities for growth
• Retain more customers
• Target marketing communications
• Gain share of the market segment

Question 7

Better matching of customer needs (Market segmentation benefits)(2p)

Answer 7

• Customer needs differ
• Creating separate products for each segment makes sense

Question 8

Increased profits for business (Market segmentation benefits) (2p)

Answer 8

• Different customers have different incomes and vary how sensitive they are to price
• Segmenting the market meens average price can raised subsequently raising profit

Question 9

Better opportunities for growth (Market segmentation benefits) (2p)

Answer 9

• Segmentation can build sales
• eg. Customers can be offered a ‘trade up’ after being sold an introductory lower-price product

Question 10

Retain more customers (Market segmentation benefits)

Answer 10

Marketing products at different stages of the product life cycle that appeal to the customer can help to retain customers

Question 11

Target marketing communications (Market segmentation benefits) (2p)

Answer 11

• Businesses need to deliver their marketing message to a relevant customer audience
• Target customer can be reached more often at a lower cost

Question 12

Gain share of the market segment (Market segmentation benefits)

Answer 12

• Through careful segmentation and targeting, the business can become the customer’s preferred choice