Now that you understand the concept of a market, lets look at smaller groups within a market, which have similar wants and needs. Businesses come up with a marketing mix which enables them to provide a variety of services for different segments in a market.
Market segments can be categorised into the following groups:
- Family size and type
- Age
- Rate of Product Use
- Lifestyle
- Location
- Gender
The benefits of market segments include its high level of precision in clearly defining markets. Market segments enable the optimisation of market resources. Market segments are essential as they help discover potential opportunities in the market and how such great market gaps can be filled.
Market segmentation has drawbacks which will affect a business. A major drawback is the increase in cost of production of goods and services. A business may have planned for a specific range or a few set products. However, with different market segments, it will have to customise it's products to satisfy the demands of those various segments.
Market segments need to be sustainable over a long period of time so that the business can have definite guarantee that it's not in it for the short-term and lose out in the long-tern. The ability of market segments to be profitable is important. No business would risk investing in a segment that isn't going to bring an valuable returns to the business.
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