The classification of customers or potential customers into subgroups with similar characteristics.
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Types of market segmentation?
Demographic, geographic, income, behavioural
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Define demographic segments
Concerns the social characteristics of individuals and households, such as age and gender.
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Define geographic segments
Defines market categories based on where people live, for example climate.
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Define income segments
Involves identifying subgroups of the population based on their economic characteristics. This can be done by categorising people by their socio economic grouping: A (professional) B (managerial+technical) C1 (skilled:non manual) etc.
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Define behavioural segments
Involves looking at patterns of consumer behaviour, such as health conscious consumers, hobbies etc.
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Benefits of market segmentation
To increase market share as they can identify market segments that have not been reached. To assist new product development (look for gaps in the market), to extend products into new markets, to identify ways of marketing a product.
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Drawbacks of market segmentation
Difficult in identifying the most important segments for a product, reaching the chosen segment with marketing, recognising changes in the segments interested in the product, and meeting the needs of customers not included in the chosen segment.
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Define market targeting
Deciding on the consumer/market segment(s) to whom you intend to sell your products to. A business has to assess the nature of each market segment+identify those that provide the best match to the businesses capabilities.
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Define concentrated marketing
Instead of targeting a small share of a large market, the company goes after a large share of one or a few sub-markets.
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Define differentiated marketing
The company targets several market segments and design separate offers for each segment.
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Define undifferentiated marketing
The company aims to appeal to the whole market with one product. Marketing concentrates on emphasising what is common in the needs of consumers rather than on differing needs.
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Define a niche market
Targeting a product or services at a small segment of a larger market. Based on exclusive, or high-quality products or are located in remote areas, where higher prices can be charged because of the inconveniences for customers finding a substitute.
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Advantages of a niche market
Less competition, small scale products, tailor made products (can adapt its products to meet customers specific demands), targeting customers (easier to target+promote their products effectively, costs may be lowered.
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Disadvantages of a niche market
Lower profits, changes in demands, an increase interest among customers may be enough to attract larger firms into the market therefore increasing the competition.
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Define mass marketing
Aiming a product at all (or most) of the market.
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Advantages of mass marketing
Large scale production, higher revenues, barriers to entry (can eliminate smaller rivals), brand awareness, research and development (to fund this they need to appeal to large, profitable mass markets).
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Disadvantages of mass marketing
Fixed capital costs may be high, changes in demand, effects of standardisation (difficult to apparel directly to individual customers), competition is high, theres less scope for added value.
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Define market positioning
Where your product or brand stands in relation to the products or brands of other businesses.
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Whats the process of market positioning?
Business draw up a market map, consumers will choose products that give them the greatest value, a business can offer lower prices than competitors or by providing more benefits (to justify higher prices), therefore they gain a competitive advantage.
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What are the factors affecting market positioning?
Attributes and benefits of the product, competition, pricing, product user, product use or application.
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Whats the purpose/value of market positioning?
Allows a business to maximise revenue by increasing volume, gives businesses scope for high prices as a result of a USP, reduces costs, enables the marketing department to save money, increase marketing efficiency due to understanding consumer needs.
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Advantages of market positioning
Allows creation of differentiation/USP, helps spots gaps in the market, encourages the use of market research and enables customers' needs to be identified.
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Disadvantages of market positioning
Reliant on quality research, even if you can identify a gap it may not mean there is actually demand there, and consumers in the gap may be difficult to reach
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