Market Segmentation

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10 Terms

1

What is market segmentation?

The process in which a single market is divided into sub markets or ‘segments’

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2

Wha does each segment in a single market represent?

A slightly different set of consumer characteristics

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3

What factors do firms often segment their markets according to?

  • Location

  • Demographics

  • Behaviour and lifestyle

  • Age

  • Gender

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4

What are the advantages of market segmentation?

  • Recognises that consumers aren’t all identical; consumer groups don’t all share the same tastes and preferences

  • Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely

  • Less expensive and wastefull than marketing products at wide market segments

  • May increase loyalty if the consumer feels that their needs are being met, which can lead to repeat purchases

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5

What are the disadvantages of market segmentation?

  • Not everyone within a segment will behave in the same way

  • It may be difficult to identify a segment and consumers can belong to multiple segments at the same time

  • Segmentation requires more detailed market research, which may be costly but beneficial to the business

  • A segment may be identified but it could be too small and unprofitable to cater for

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6

What is market mapping?

A tool for identifying the position of a product within a market; it refers to a 2D diagram that shows the attributes or characteristics of a product in comparision to rivals.

Only two criteria can be chosen e.g. price (high/low) and quality (high/low) or age (young/old) and income (high/low) etc.

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7

What does no spaces left on the market map indicate?

That the market is saturated. This means that there are no opportunities to exploit a market niche in the market, competiton is likely to be high and profits low

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8

What do spaces in the market map indicate?

The existence of a market niche. This needs to be research carefully before the business commits. Ths gap doesn’t represent a worthwhile market as the business would find it impossible to build and maintain a loyal customer base

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9

Usefullness of market mapping

  • Gaps in the market can be identified - may enable a business to come up with ideas or new products

  • Comparisons can be made between business’s products and those of its rivals

  • Market maps are simpe to construct and offer a visual illustration of a products position in the market

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10

Limitations of market mapping

  • A gap in the market may exist because it’s not profitable to fill

  • Mapping a market may require primary research, which can be expensive

  • Only two criteria can be chosen, which may prove too simplistic

  • Markets are often dynamic and a market map only provides insight at a specific point in time

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