Page 152 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 3 Marketing

These factors are often combined when segmenting a market; for example the

Australian Tourist Commission divides the travel market into specifi c segments,
including:
■ independent adventurers aged 25–34 (primary market)
■ young independent travellers (YITs) aged 18–24 (secondary market)
■ independent adventurers aged 45–65.
Benefits of segmentation to business

All these methods divide the whole market into smaller groups. Whichever method

is used to separate consumers into different segments or groups, segmentation has
many benefi ts.
■ Goods and services can be designed to meet the specific needs of consumers in
each segment. This is likely to increase sales.
■ Small firms which may not be able to compete in the whole market are able to
operate in one or two segments – perhaps a niche market.
■ Segmentation of the whole market sometimes identifies a segment of consumers
who have very specialised needs that are not currently being satisfied. This
presents an opportunity for niche marketing.
■ Marketing strategies can be better targeted at each segment. This reduces the
waste of scarce resources. For example advertising can be directed at the target
market and not wasted on trying to sell the product to the whole market.
■ It may be possible to charge higher prices for very similar products in one
150 segment than in another. This is known as price discrimination. For example,
air travel will often have three types of passenger: first class, business class

and economy class. They all travel on the same aeroplane, but pay very

different prices. This enables the airline to earn higher profits from those
passengers prepared to buy first or business class tickets.
Choosing a method of segmentation

There is no one correct method of market segmentation. Very often the method

chosen will depend on the type of product or service that a business wants to off er to
the market. For example, a holiday company might use demographic segmentation
to divide the market for its products according to the family size of consumers.
Consumers with young children will probably be looking for a completely diff erent
holiday from a single 24-year-old, or a retired married couple.
A holiday destination for families