1-2-3-Market-Segmentation

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Exam code:1BS0

Using market segmentation to target customers

Market segmentation is the process in which a single market is divided into sub markets or ‘segments’
- Each segment represents a slightly different set of consumer characteristics
- Firms often segment their markets according to factors such as geographical location, demographics, behavior and lifestyle, age or gender

A market for a product such as crisps is not simply seen as one market e.g. the crisp market is divided up into many market segments such as
- Dinner party snacks (Walkers Sensations, Pringles, Burts) are targeted at middle to upper earners/professionals with a premium price
- Health conscious crisps (Walkers lite, Walkers baked, Revita lite) are targeted at the health conscious market
- Lunch box value snacks (multipacks, hoola hoops etc) are targeted at families and the mass market

Advantages	Disadvantages
Recognises that consumers are not all identical; consumer groups do not all share the same tastes and preferences	Not everyone within a segment will behave in the same way
Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely	It may be difficult to identify a segment and consumers can belong to multiple segments at the same time
Less expensive and wasteful than marketing products at wide market segments	Segmentation requires more detailed market research, which can prove costly but beneficial to the business
May increase loyalty if the consumer feels that their needs are being met, which can lead to repeat purchases	A segment may be identified but it may be too small and unprofitable to cater for

Market mapping is a tool for identifying the position of a product within a market
- A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products
- Only two criteria can be chosen, e.g. price (high/low) and quality (high/low), age (young/old) and income (high/low), etc

If there were no spaces left on the market map, it indicates that the market is saturated
- This means that there are no opportunities to exploit a market niche in the market
- Competition is likely to be high and profits low
However, the existence of a space on the market map may indicate the existence of a market niche
- This needs to be researched carefully before the business commits e.g. it looks like there is a gap in the market in high price / low quality area in the map above
- This gap does not represent a worthwhile market as the business would find it impossible to build and maintain a loyal customer base

Usefulness	Limitations
Market gaps can be identified, which may enable a business to come up with ideas for new products Comparisons can be made between a business’s products and those of its rivals – where are the business’ products positioned about its rivals? Market maps are simple to construct and offer a visual illustration of a products position in the market	A gap in the market may exist because it is 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