Market segmentation

• 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
• Ways to segment a market

  • 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 of market segmentation

  • Recognises that consumers are not all identical; consumer groups do not 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 wasteful 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 
• 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 can prove costly but beneficial to the business
  • A segment may be identified but it may be too small and unprofitable to cater for
• Using market mapping to identify gaps in the market

  • 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
• Market map analysis

  • 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 of market mapping

  • 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
• Limitations of market mapping

  • 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