- Markets can be segmented in several ways
- The main ways include location, demographics, lifestyle, income and age
Diagram: Ways to Segment Markets (requested edit)
Businesses can choose to segment markets in a variety of ways
1. Location
- Urban and rural customers' needs relate to their surroundings
- E.g. City-dwellers are likely to purchase small, electric vehicles, while those who live in the countryside tend to prefer larger, all-terrain vehicles
- Customers in warmer countries make different purchasing decisions to those living in cooler climates
- E.g. Sales of air-conditioning units in Italy and Turkey are significantly higher than in Germany and the UK
- Within a country, customers living in different regions have varied preferences
- E.g. France is well-known for its regional food specialties, with residents of southern départements generally preferring a Mediterranean diet, whilst those in more northern regions consume more dairy products and red meat
2. Demographics
- Men and women often have different purchasing preferences
- Men tend to spend more than women when shopping
- Women are more price-conscious shoppers than men, buying more reduced-price items and using coupons more frequently
- As populations age, spending patterns are changing
- Spending on specialist services such as personal care and single-person travel has increased significantly
- Many countries have increasingly ethnically-diverse populations
- Markets for clothing, food and celebration items can be targeted at specific ethic or religious groups
3. Lifestyle & Income
- Customers make different lifestyle choices
- E.g. Travel companies target different packages at families, thrill-seekers and those looking to pursue a specilaist interest such as cuisine or art
- Some products are aimed at those on high incomes, whilst others target customers with limited budgets
- E.g. Luxury brand Mulberry targets very high-income customers with its iconic handbags whilst budget-conscious customers are served by brands such as H&M and Primark
4. Age
- Many products are aimed at different age groups, who are likely to have different interests, influences and spending power
- E.g. In 2022, consumers in the United States spent an average of $1,945 on clothing, with most being spent by the generation born between 1965 and 1980, known as Generation X
The Advantages & Disadvantages of Market Segmentation
Advantages
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Disadvantages
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- Recognises that consumers are not all identical; consumer groups do not all share the same tastes and preferences
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- Not everyone within a segment will behave in the same way
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- Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely
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- It may be difficult to identify a segment and consumers can belong to multiple segments at the same time
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- Less expensive and wasteful than marketing products at wide market segments
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- Segmentation requires more detailed market research, which can prove costly but beneficial to the business
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- It may increase loyalty if the consumer feels that their needs are being met, which can lead to repeat purchases
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- A segment may be identified but it may be too small and unprofitable to cater for
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