5.2 - Segmentation

5.2 - Segmentation

1. key words

   • sales volumes - measures the number of items sold
   • sales value - measure the revenue generated
   • segmentation - occurs when a market is divided into different groups of needs and wants

2. the market

   • the marketing function of the business is interested in the background of potential buyers of products
   • Market means the focus is on what demand there is for a products what the sales are
   • the size of the market looks at how big the market is in terms of sales, known as sales volume and how big it is in terms of sales value
     • e.g. the sales volume for a product in one year is 1,000 with a sales value of £5,000 i.e. each product was sold for £5
   • the growth of the market will compare the sales volume in one year with another to see if market is growing or contracting e.g. if 2016 was 1,000 and 2015 was 500 there is a growth by 100%
   • marketing managers try and understand what is happening in different parts of the market as well as a whole

3. calculating market growth

   • change in market size/original market x100
   • if the market was worth £10,000 but is now worth £12,00 this year then it would be 12,000-10,000 = 2,000
     • market growth = 2,000/10,000 x 100
       • 20%

4. What is segmentation?

   • occurs when a market is divided into groups e.g. the car market is split into groups of buyers: family cars, sports cars and 4x4
   • Benefits
     • business being able to develop products that closely meet customer needs e.g. economical city cars
     • allows different customers to be targeted precisely in advertising and price e.g. city car drivers may want a car under a certain price and mainly watch tv adverts

5. Ways of segmenting a market

   • gender
   • age e.g. chocolates based on cartoons for kids and luxury for adults
   • location e.g. subway in India with vegetarian options due to local preferences
   • income e.g. hotel rooms in 5-star hotel are more expensive to others

6. targeting

   • once the business has identified the relevant segments of the market it will decide which ons to focus on
     • it needs to consider if it can make enough money as the segment may be unprofitable
       • it needs to consider if it can compete with skills and resources
         • it will need to consider the opportunity cost e.g. are there better alternative segments?