Business Studies

Chapter Segmentation

Market Segmentation


Understand how and why market segmentation is carried out Show how markets can be segmented according to age, sociosocio-economic groupings, location or gender Demonstrate an understanding of why such segmentation can be of use to a business Select and justify a method of segmentation appropriate to given circumstances

A market for a product is made up of different types of consumer who buy the product, which can be subdivided into segments. Market segments are an important part of marketing because markets consist of customers with similar needs. For example, consider the wide variety of markets that exist to meet the following customer needs:

Need To eat To drink To exercise To travel To socialise

Market Segments Created to Meet the Customer Need Restaurants; fast-food outlets; grocery supermarkets Coffee bars; wine & spirits production; milk production Health & leisure clubs; sport equipment; walking holidays Airlines; railways; motor car industry; holiday industry Introduction agencies; sporting events; pubs

As you can imagine, such markets (if they were not further divided) would be very broad and of little use to someone wanting to make sensible marketing decisions.

  

 

Fortunately for those involved in marketing, customers in a market are not the same. same. Customers differ in the: Benefits they want Amount they are able to or willing to pay Media (e.g. television, newspapers, radio stations) they see Quantities they buy Time and place that they buy

It therefore makes sense for businesses to segment the overall market and to target specific segments of a market so that they can design and deliver more relevant products and services By splitting the market into segment it is easier to analyse who buys the product and then aim to target these customers specifically. For instance if you know that it is mainly young men under 21 who buy your product you might then advertise in magazines such as FHM or Loaded (mens magazine)

The main ways in which market can be segmented are into:

   

  

Socio-economic grouping SocioAge of the customer for instance teenagers or old age pensioners Gender male or female Size and composition of customer households a household of say two unmarried adults, or a single person living only or a family with 2 children and a per dog Geographical location e.g. London, Scotland Ethnicity and/or religion e.g. Islamic or Anglo-Italian AngloEducational background of customers e.g. graduates or school leavers

Segmentation that divides the market into groups based on factors such as age, gender and family size is known as demographic demographic segmentation. segmentation. SocioSocio-economic segments are widely used in marketing.

The six standard socio-economic groupings in the socioUK are:  Group Description A Higher managerial, administrative or professional e.g. surgeon or company director B Intermediate managerial, administrative or professional e.g. teachers, solicitors C1 Skilled non-manual e.g. sales nonassistants, shop floor supervisors C2 Skilled manual e.g. electrician, plumber D Semi skilled e.g. assembly line workers, cleaners E Unskilled, pensioners and unemployed

Age is a particularly important grouping because:  Members of the same age group tend to be at the same stage of their family life cycle, e.g. new parents, and thus to have similar wants.  Consumers of a similar age also have similar financial circumstances (e.g. retired people living on a pension and savings will have a different income they can spend compared with students at university).