Market segmentation

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  • Created by: Jeon32666
  • Created on: 06-02-19 18:37

Market segmentation

Advantages

  • Businesses can define their target markets carefully and produce goods according to the demand of each segment which leads to increased sales
  • It enables identification of gaps in the market
  • Small firms unable to compete in the whole market are able to specialize in one or two market segments
  • Price discrimination can be used to increase revenue and profits

Disadvantages

  • Research and development costs might be high
  • Extensive market research is needed
  • Promotional costs might be higher by promoting and stocking differentiated product
  • By focusing on only one or two market segments, there is a risk because of frequent change in customer habits

Evaluation

It depend upon the objectives and the type of market the business operates in, to decide whether to use market segmentation or not. If a business wants to develop a brand image that suit a particular segment. In a competitive market it would be preferable to segment the market to gain higher customers.

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