3.1.4 Market segmentation (3)
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1.
Consider a company that sells premium coffee beans. Using a table, outline the different market segments the company could target and explain the key characteristics of each segment. (8 marks)
Here's a table outlining potential market segments for a premium coffee bean company:
| Segment | Characteristics |
| Coffee Connoisseurs | High income, educated, appreciate quality and origin of coffee beans, willing to pay a premium. Seek unique flavour profiles and brewing methods. |
| Convenience Seekers | Busy professionals, limited time, value convenience and ease of preparation. Prefer pre-ground or single-serve options. |
| Social Coffee Drinkers | Younger demographic (18-35), value social experiences and trendy coffee shops. Interested in aesthetically pleasing coffee and Instagrammable drinks. |
| Value-conscious Consumers | Price-sensitive, seek good value for money. May be willing to compromise on premium quality for a lower price. |
By understanding the characteristics of each segment, the coffee company can tailor its marketing messages, product offerings, and distribution channels to effectively reach and satisfy each group.
2.
A supermarket chain is considering expanding its customer base. Describe how the supermarket could use market segmentation based on income. Provide examples of products and marketing strategies that would be appropriate for different income segments.
The supermarket can segment its market based on income levels, typically categorized as:
- Low Income: Budget-conscious shoppers, prioritizing value for money.
- Middle Income: Balanced approach, seeking quality and affordability.
- High Income: Willing to pay a premium for quality, convenience, and luxury.
Products and Marketing Strategies by Income Segment:
| Income Segment | Appropriate Products & Marketing |
| Low Income | Own-brand products, discounted items, meal deals, promotions, value packs. Marketing focuses on price and savings. |
| Middle Income | Wide range of products, including branded items, fresh produce, convenience foods. Marketing emphasizes quality, convenience, and value. |
| High Income | Premium products, organic foods, gourmet items, personalized services, concierge shopping. Marketing focuses on exclusivity, quality, and exceptional service. |
Advantages of income segmentation:
- Effective pricing strategies: Different income groups have varying price sensitivities.
- Product assortment: The supermarket can offer a range of products to meet the needs of different income groups.
- Targeted promotions: Promotions can be tailored to appeal to specific income segments.
Disadvantages of income segmentation:
- Difficult to accurately assess income: Income data can be unreliable or outdated.
- Ethical concerns: Targeting low-income groups with high-priced products can be seen as exploitative.
- Social stigma: Income segmentation can reinforce social inequalities.
Consider a company selling outdoor equipment. Explain how market segmentation based on lifestyle can be beneficial. Give three examples of lifestyle segments and describe the types of products and marketing activities that would be most effective for each.
Market segmentation based on lifestyle groups customers into segments based on their activities, interests, and opinions. This allows for more relevant and effective marketing. Here are three examples:
- Adventure Seekers: Individuals who enjoy outdoor activities like hiking, climbing, and camping. They value durability, performance, and innovation. Products: High-performance tents, backpacks, climbing gear, GPS devices. Marketing: Adventure-focused advertising, sponsorships of outdoor events, social media campaigns showcasing extreme sports.
- Health & Fitness Enthusiasts: People who prioritize physical well-being and engage in activities like running, cycling, and yoga. They value comfort, functionality, and health benefits. Products: Lightweight running shoes, cycling apparel, yoga mats, fitness trackers. Marketing: Partnerships with fitness influencers, advertising in health magazines, sponsoring sporting events.
- Family Adventurers: Families who enjoy outdoor activities together, such as camping, picnics, and nature walks. They value practicality, safety, and affordability. Products: Family-sized tents, camping equipment, picnic gear, safety equipment. Marketing: Family-friendly advertising, promotions on camping packages, partnerships with family-oriented websites.
Advantages of lifestyle segmentation:
- Stronger customer connection: Appeals to customers' values and aspirations.
- More relevant products: Products are designed to meet specific lifestyle needs.
- Effective communication: Marketing messages resonate with the target audience.
Disadvantages of lifestyle segmentation:
- Difficult to define: Lifestyle is subjective and can be difficult to measure.
- Changing lifestyles: Lifestyle trends can change rapidly, requiring ongoing monitoring.
- Potential for stereotyping: Lifestyle segments can reinforce stereotypes about certain groups of people.
3.
Explain how a company might use demographic, psychographic and behavioural segmentation to target different customer groups. Provide examples for each type of segmentation. (10 marks)
Demographic Segmentation: This involves dividing the market based on easily measurable characteristics such as age, gender, income, education, occupation, and family size.
- Example: A luxury car manufacturer might target high-income individuals aged 45-60 with a focus on status and performance.
- Example: A toy company might target families with young children (age 2-8) with a range of age-appropriate toys.
Psychographic Segmentation: This focuses on lifestyle, values, attitudes, interests, and personality traits. It's more difficult to measure than demographic data but provides deeper insights into consumer motivations.
- Example: An outdoor clothing company might target individuals who value adventure, sustainability, and healthy lifestyles.
- Example: A coffee shop might target students and young professionals who value social interaction, creativity, and a relaxed atmosphere.
Behavioural Segmentation: This divides the market based on consumer behaviour, such as purchase history, brand loyalty, usage rate, and benefits sought.
- Example: An airline might offer frequent flyer programs to reward loyal customers and encourage repeat business.
- Example: A supermarket might offer discounts on products that are frequently purchased by a particular group of customers.
By combining these three types of segmentation, a company can create a more detailed and accurate profile of its target customers.