Component 1-07. market segmentation

what is market segmentation?

Breaking down a market into sub-groups with similar characteristics. A business can then target these groups and develop products and services for each of them.

what is geographical segmentation?

The nature of the region eg. rural/urban , the location, it is useful in highly culturally diverse markets. Many large businesses selling into a global market have different products for different countries or areas.

What is a drawback of geographical segmentation?

Consumer tastes are becoming more uniform across geographic boundaries, the sample chosen might mot be accurate

What is demographic segmentation?

Age, gender, social class, income, ethnicity, or religion. A business may target different people for example a business may target females or males.

What is a drawback of demographic segmentation?

Consumers try to defy consumption patterns associated with demographic groups

What is psychographic segmentation?

Attitudes, opinions and lifestyle e.g newspaper targeted at different party voters

What is a drawback of psychographic segmentation?

It is qualitative data so it is difficult to collect data about beliefs and attitudes of customers

Why do firms choose to use market segmentation?

For targeted marketing - the business can choose promotional strategy that will reach target audience. This could lead to money not being wasted on other less beneficial strategies. Therefore increased revenue and potential profits, provided costs do not increase. Therefore business can invest in growth strategies

Why do firms choose to use market segmentation? Point 2

For advertisement which could lead to higher brand recognition. Therefore more customers and a larger loyal customer base. Therefore repeat customers, increased potential profit.

What are the benefits for customers using segmentation?

Can feel included

Personalised products

More options

Customer satisfaction

What are the drawbacks customers may face when a business uses segmentation?

Deters other people from buying a product if not aimed towards them- less sales

Higher price

Could deter from purchasing from brand again

Hard to come by

Potentially damaging for the brand