3.3 - Market segmentation, targeting and positioning

Question 1

What is market segmentation?

Answer 1

Market segmentation is the process of dividing potential customers into different groups based on characteristics like age, gender, income and much more.

Question 2

Name four methods of market segmentation.

Answer 2

Age.
Income.
Gender.
Location.

Question 3

What is the mass market?

Answer 3

The mass-market tries to make products or services for all consumers.

The mass market will be large and the types of products will be more generalised.

Question 4

What is a niche market?

Answer 4

The niche market appeals to a much smaller segment.

The niche market will be smaller than the mass market.

The niche market provides products and/or services which focus on a specialist want or need.

Question 5

Advantages and disadvantages of Mass markets.

Answer 5

Benefits:
Having more customers.
Benefitting from economies of scale (due to higher output levels).
Can build a strong market presence.

Drawbacks:
Higher levels of competition.
Lower profit margins.

Question 6

Advantages and disadvantages of Niche markets.

Answer 6

Benefits:
Less competition.
Specific market.
Can develop specific expertise.
Higher profit margins.
Customer loyalty.

Drawbacks:
No economies of scale.
Vulnerability because they have an undiverse product portfolio.