Market Segmentation

What is market segmentation?

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

Wha does each segment in a single market represent?

A slightly different set of consumer characteristics

What factors do firms often segment their markets according to?

• Location

• Demographics

• Behaviour and lifestyle

• Age

• Gender

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

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

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.

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

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

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

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