Q&A - Outline the main business benefits from market segmentation
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Market segmentation offers the following potential benefits to a business:
Better matching of customer needs:
Customer needs differ. Creating separate products for each segment makes sense
Enhanced profits for business:
Customers have different disposable incomes and vary in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits
Better opportunities for growth:
Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being sold an introductory, lower-priced product
Retain more customers:
By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands.
Target marketing communications:
Businesses need to deliver their marketing message to a relevant customer audience. By segmenting markets, the target customer can be reached more often and at lower cost
Gain share of the market segment:
Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors
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