Market Segmentation Questions and Answers [With PDF]
No single product suits everyone. A student, a retired teacher and a busy engineer all want different things from a phone, a bank account or a shampoo. Market segmentation is how marketers split a large market into smaller groups of people with similar needs, so they can serve each group better. This chapter covers the types of markets, the bases of segmentation, and what comes after: targeting and positioning. Here are 25 important questions with clear answers and tables, ready for exams, vivas and interviews.
This is Chapter 4 of our Marketing course. It follows Functions of Marketing and comes before Marketing Mix.
Markets and Their Types
Q1. What is a market?
A market is the set of all actual and potential buyers of a product or service.
Q2. What are the characteristics of a market?
- It is made up of current and prospective buyers.
- There must be a demand for the product or service.
- Buyers must be able to afford it.
- Buyers must be willing to spend money on it.
- Buyers must be legally allowed to buy it.
Q3. How are markets classified?
| Market | Buyers |
|---|---|
| Consumer market | Individuals and households buying for personal use |
| Business (industrial) market | Organizations buying to produce other goods or to resell. It includes the producers market and the resellers market. |
| Government market | Government organizations buying to run public services |
| Institutional market | Non-profit organizations such as schools, hospitals and charities |
Q4. What is the consumer market?
The market of individuals and households who buy goods and services for their own personal and family use.
Q5. What are the characteristics of the consumer market?
- It is made up of final consumers.
- It develops wherever people live.
- The main purpose of buying is to consume and satisfy needs.
- Buyers purchase small quantities, frequently.
- There are a very large number of buyers.
Q6. What is the business (industrial) market?
The market of organizations that buy goods or services to use in producing other goods, or to resell them at a profit, or to provide services.
Q7. What are the characteristics of the business market?
- Buyers are producers and resellers.
- There are far fewer buyers than in the consumer market.
- The volume of each purchase is much larger.
- Demand is inelastic and derived: it depends on the demand for the final consumer product.
- Buyers often deal directly with manufacturers.
- Purchases are made by professionals using specific criteria.
Q8. What is the difference between the consumer market and the business market?
| Point | Consumer market | Business market |
|---|---|---|
| Purpose of buying | Personal and family satisfaction | Production or resale, to earn profit |
| Quantity | Small purchases | Large purchases |
| Number of buyers | Very large | Relatively small |
| Location | Widely scattered | Often concentrated in certain regions |
| Buying decision | Often emotional and quick | Rational and carefully planned |
Q9. What is the producers market?
Buyers who purchase goods or services to use in making other products. Example: a furniture factory buying timber and screws.
Q10. What is the resellers market?
Intermediaries who buy goods to resell them at a profit, such as wholesalers and retailers.
Q11. What is the government market?
Government organizations that buy or rent goods and services to carry out public functions, such as defence, roads, schools and hospitals.
Q12. What is the institutional market?
Non-profit organizations, such as schools, hospitals, churches and charities, that buy goods and services to serve the people in their care.
Market Segmentation
Q13. What is market segmentation?
Market segmentation is dividing a large market into smaller groups (segments) of buyers who have similar needs, characteristics or behaviour, so that each segment can be served with a suitable marketing programme.
Q14. What are the objectives and benefits of market segmentation?
- It helps choose the right marketing strategy.
- It satisfies customers better.
- It helps the firm compete successfully.
- It allows better control of marketing effort and costs.
- It identifies the groups of buyers who will respond.
- It reveals opportunities and threats in each segment.
Q15. Why is market segmentation done?
The main purpose is to earn more profit by satisfying customers efficiently. No firm can serve every buyer well, so the market is divided to match the company’s marketing programme with the demand of each segment. A firm can segment its market by region, product type, price, customer type and other factors, according to its capabilities.
Q16. What makes market segmentation effective?
| Requirement | Meaning |
|---|---|
| Measurable | The size and purchasing power of the segment can be measured |
| Accessible | The firm can reach and serve the segment |
| Substantial | The segment is large and profitable enough to be worth serving |
| Differentiable | Segments respond differently to different marketing programmes |
| Actionable | The firm has the capacity to attract and serve the segment |
Bases of Segmentation
Q17. What are the bases of consumer market segmentation?
| Basis | Divides buyers by | Example |
|---|---|---|
| Geographic | Where they live | Warm clothes for cold regions |
| Demographic | Population characteristics | Toys for children, health plans for seniors |
| Psychographic | Lifestyle, personality and values | Luxury cars for status-seekers |
| Behavioral | How they use and respond to the product | Loyalty rewards for frequent buyers |
Q18. What is geographic segmentation?
Dividing the market by location: country, region, city, rural or urban area, population density and climate. Example: a company sells raincoats in a rainy region and sunscreen in a hot one.
Q19. What is demographic segmentation, and what factors are used?
Dividing the market by characteristics of the population. The factors are:
- Age and life-cycle stage
- Gender
- Family size and family life cycle
- Income
- Occupation
- Education
- Religion, race and nationality
Q20. What is psychographic segmentation?
Dividing the market by psychological and lifestyle differences between buyers. The factors are social class, lifestyle (activities and interests), personality, and values and attitudes. Two people with the same age and income may buy very different products because of their lifestyle.
Q21. What is behavioral segmentation, and what factors are used?
Dividing the market by buyers’ knowledge of, attitude toward, use of or response to a product. The factors are:
- Occasions: when they buy, such as festivals or holidays.
- Benefits sought: what they want from the product, such as price, quality or status.
- User status: non-user, ex-user, potential, first-time or regular user.
- Usage rate: light, medium or heavy user.
- Loyalty status: how faithful they are to a brand.
Q22. What are the bases of business market segmentation?
- Geographic location of the buyers
- Size of the buying company
- Type of industry
- Benefits or purchase criteria they look for
- User status
- Usage rate
- Buying situation (new buy, repeat buy)
Targeting and Positioning
Q23. What is market targeting, and what strategies can be used?
Targeting is choosing which segments to serve after the market has been segmented. The main strategies are:
| Strategy | Meaning |
|---|---|
| Undifferentiated (mass) marketing | Ignore segment differences and offer one product to the whole market |
| Differentiated marketing | Target several segments, with a different offer for each |
| Concentrated (niche) marketing | Focus on one or a few segments |
| Micromarketing | Tailor products to individuals or very small local groups |
Q24. What is positioning?
Positioning is designing the product and its image so that it occupies a clear, distinctive and valued place in the minds of target customers compared with competing products. Example: positioning a car as the safest family car.
Q25. What is the difference between segmentation, targeting and positioning (STP)?
| Step | Question it answers |
|---|---|
| 1. Segmentation | How can the market be divided into groups? |
| 2. Targeting | Which groups will we serve? |
| 3. Positioning | How do we want those customers to see us? |
Quick Revision Points
- Market = actual and potential buyers.
- Markets: consumer, business (producers and resellers), government and institutional.
- Segmentation bases: geographic, demographic, psychographic, behavioral.
- Geographic = location. Demographic = age, income, gender. Psychographic = lifestyle and personality. Behavioral = use and response.
- After segmentation comes targeting (which segments to serve) and positioning (the image in customers’ minds).
Test yourself with the chapter quiz below, then continue to Marketing Mix.
