Market Segementation

Question 1

What is a market segment

Answer 1

• a group of customers that have similar set of characteristics

Question 2

How can a market be segmented

Answer 2

• age
• gender
• income
• lifestyle
• level of education
  -geographical
• religion

Question 3

Why do businesses need to market segment

Answer 3

As customers differ in :
- benefits they want
- amount able and willing to pay
- media they use
- quantities they buy
- how to promote product to increase sales

Question 4

4 segmentation methods

Answer 4

• geographical
• demographic
• behavioural
• psychographic

Question 5

Geographic

Answer 5

• customer location
• region
• urban/rural

Question 6

Demographic

Answer 6

• age
• gender
• occupation
  -socio-economic group

Question 7

Behavioural

Answer 7

• rate of usage
• loyalty status
• readiness to purchase

Question 8

Psychographic

Answer 8

• personality
• lifestyle
  -attitude
  -class

Question 9

Benefits of market segmentation

Answer 9

• better matching of customer needs
• enhanced profits from business
• retained more customers
• target marketing communications

Question 10

Better matching of customer needs

Answer 10

• customers needs differ
• creating separate products for each segment - customers more satisfied

Question 11

Enhanced profits for business

Answer 11

• different customers vary in how sensitive they are to price- select appropriate price for each segment

Question 12

Retain more customers

Answer 12

• by marketing products appeal to customers at different stages of life cycle - business retain customers who might otherwise switch to competitor

Question 13

Target marketing communications

Answer 13

• business need to deliver their marketing message to relevant customers- segment can be reached more often at lower cost

Question 14

Limits of segmentation

Answer 14

• increases costs- attempt to serve many segments - increases due to product variation
• promotions and distribution expenditures increase- separate program used for different market Segments

Question 15

Market map

Answer 15

A grid that measures 2 different aspects of the brands or business within a market - identify marketing strategy of competitors in market

Question 16

Purpose of market mapping

Answer 16

• shows how market is segmented
• identify gaps in market
• show where the sector is overcrowded
• to stop the producer form becoming over reliant on one sector

Question 17

Market segmentation benefits

Answer 17

• firms can design and create good specifically aimed at the precise customer
• prices and profits will be higher by adding value for specific customers
• firms can target different segments with different products

Question 18

Market segmentation disadvantages

Answer 18

• research and development and production cost is high
• promotional costs - high as different advertisements and promotions needed or different segments

Question 19

Market positioning advantages

Answer 19

• helps spot gaps in the market
• allows firms to analyse their competitors
• suggests ways to create brand images and marketing techniques

Question 20

Market positioning

Answer 20

• no guarantee of success if positioned in the wrong place
• requires market research to find out consumer opinion on each product
• needs careful selection of dimension / criteria used on the map