Q&A - Outline the main business benefits from market segmentation

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