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