Question

Explain the advantages and limitations of market segment.

Answer 1

Answer:

Most common limitations of market segmentation include followings:

1. Limited Production: In each specific segment, 2. customers are limited. ...

3. Expensive Production: ...

4. Expensive Marketing: ...

5. Difficulty in Distribution: ...

6. Heavy Investment: ...

7. Promotion Problems: ...

8. Stock and Storage Problems

Answer 2

Answer:

Advantages :

• The marketer can spot and compare marketing opportunities. He can examine the needs of each segment and determine to what extent the current offering satisfies these needs. Segments which have low level of satisfaction from current offerings represent excellent opportunities for the marketer.
• With the help of knowledge about different segments, the marketer can better allocate the total marketing budget. Differences in customer response to different marketing tools serve as the basis for deciding on the allocation of market funds to different customer groups.
• The marketer can modify his product/service and marketing appeals to suit the target segment.
• Segmentation facilitates setting up of realistic selling targets and priorities.
• Management can identify new profitable segments which deserve special attention.
• It is possible to deal with competition more effectively by using resources more effectively.
• Appropriate service packages can be developed for each market segment.

Limitations :

• Limited Production : In each specific segment, customers are limited. So, it is not possible to produce products in mass scale for every segment. Therefore, company cannot take advantages of mass scale production; scale of economy is not possible. Product may be costly and affect adversely to the sales.
• Expensive Production : Market segmentation is expensive in both production and marketing. In order to satisfy different groups/segments of buyers, producers have to produce products of various models, colors, sizes, etc., that result into more production costs. In the same way, the producers are required to maintain large inventory for different styles, colors, and sizes of products.
• Expensive Marketing : Market segmentation also results into expensive marketing. Due to different groups of buyers, the marketer has to consider all the segments in terms of needs, interests, habits, preferences and attitudes. Marketer has to formulate and implement several marketing strategies for different segments.
• Difficulty in Distribution : Company needs to make the separate arrangement for each of the products demanded by different classes of customers. Salesman’s recruitments, selection, training, payments, and incentives are more difficult and costly. Company has to maintain separate channels and services for satisfying varied customer groups.
• Heavy Investment : Market segmentation leads to heavy investment. In order to satisfy different needs and wants of various groups, a company has to produce variety of product lines and product items. For the purpose, the company requires to invest more on technology and other inputs that may demand heavy investment.
• Promotion Problems : Market segmentation also creates promotional problems and multiplies promotional difficulties. It is obvious that different segments are made on the basis of distinguished characteristics of buyers. Each group differs in terms of advertising media, appeal or message. In order to influence various segments of buyers, the company is required to prepare a separate advertising programme or strategy. Similarly, personal selling and sales promotional activities become more complex. Company needs to spend more to take benefits of specialization .
• Stock and Storage Problems : To meet needs and wants of different consumer groups, the company must maintain adequate stock of various products on a continuous basis. This creates problem of stocks, storage, and working capital. Most limitations reflect the impact of situation and inability of manager to segment the market purposively and meaningfully. But, limitations cannot restrict segmentation philosophy and practice. These limitations can be overcome by segmenting market carefully and objectively.