3.3.3 Making marketing decisions: segmentation, targeting, positioning

Question 1

Market segmentation

Answer 1

• The technique where the market is broken down into smaller sections with similar characteristics
• This will make the business focus and target the segment, or part, of the mass market that is most likely to buy the product or service on offer

Question 2

Targeting

Answer 2

Selecting those market segments that are worth targeting

Question 3

Positioning

Answer 3

Making decisions about the positioning of products within the market, in particular considering the competition they face and how they will be differentiated (market mapping)

Question 4

The purpose of marketing

Answer 4

To identify and meet customer needs

Question 5

Niche marketing

Answer 5

A relatively small number of potential customers

Question 6

Advantages of niche marketing

Answer 6

Focus and respond quickly, high return on marketing spending, little competition, premium price

Question 7

Disadvantages of niche marketing

Answer 7

Vulnerable to change, may attract large firms, sales levels may be low

Question 8

Mass marketing

Answer 8

Anyone willing and able to buy

Question 9

Advantages of mass marketing

Answer 9

High sales and regular revenue

Question 10

Disadvantages of mass marketing

Answer 10

High profits attract competitors, hard to spot changes in consumer needs

Question 11

Consumer marketing

Answer 11

Products to solve consumer needs

Question 12

Business marketing

Answer 12

Serving the needs of the businesses

Question 13

Examples of market segmentation

Answer 13

• Clothes industry

- Magazine industry

Question 14

Ways in which the consumer market can be segmented

Answer 14

• Behaviour: brand loyalty, usage, attitudes, responses and price sensitivity
• Demographic: Age, family size, occupation, ethnicity, education and income
• Geographic: towns, counties, countries, climate and population growth rate
• Income: Life style and tastes. Socio-economic grouping e.g. A,B and C1
• Gender

Question 15

Market segments

Answer 15

Groups of similar needs and wants within a market

Question 16

The mass market: Behavioural segmentation

Answer 16

• When they buy
• How much they buy
• How brand loyal are they?

Question 17

Socio-economic groups

Answer 17

• A: Upper middle class e.g. Top professionals
• B: Middle class e.g. Intermediate professionals
• C1: Lower middle class e.g. Junior management
• C2: Skilled working class e.g. Skilled manual workers
• D: Working class e.g. Semi and unskilled manual workers
• E: Poorest in society e.g. Pensioners and unemployed

Question 18

Why Socio-economic grouping is useful

Answer 18

• They allow businesses to accurately target potential customers, recognise competitors, measure performance and anticipate future market trends
• It is therefore, impossible for a business to develop an effective marketing strategy, or “fine tune” a Marketing Mix, until market segments are correctly identified

Question 19

Advantages of segmentation

Answer 19

• Understanding a market segment helps in meeting their needs; increased sales
• It is cheaper to produce a product/service that meets a specific need; increased profit margins
• Less wasteful of resources than trying to sell a product to everyone; advertising
• Segmentation is a way of differentiating a product or service from competition, thus enabling the business to charge a higher price

Question 20

Disadvantages of segmentation

Answer 20

• Depends upon an entrepreneur’s knowledge of the market; this may be limited in the case of a small business set up.
• Segmentation is an approximation of behaviour; not everyone behaves in the same way
• May not be appropriate to a very small business with limited markets; putting all your eggs in one basket

Question 21

Influences on choosing the target market

Answer 21

• Is there sufficient demand and potential profit to justify the investment?
• Does it have the ability to be competitive and gain sales?
• Niche or Mass market?

Question 22

The influences on positioning are…

Answer 22

• The strengths of the business
• How innovative they are as a business
• What competitors are doing
• Market conditions