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Segmentation Practice Questions

Question 1

8 marks

Answer all parts of this question.

Table 1 shows the ages of the 400 customers who bought a pair of trainers from a sports shop during one month.

Age of customer Number of customers
Under 18 48
18–25 92
26–40 140
41–60 84
Over 60 36
Total 400
(a)

Explain the meaning of the term 'market segmentation' using an example.

(b)

Using Table 1, calculate the percentage of the shop's customers who were aged 26–40. Show all workings.

(c)

State and explain two reasons why a business may segment its market by age.

Question 2

12 marks

Item A: Fellside Clothing Ltd

Fellside Clothing Ltd is a private limited company based in the north of England. It makes waterproof walking jackets, which it sells online and through its three shops in towns close to a national park. A Fellside jacket is priced at £180. There are many businesses selling outdoor clothing and some sell waterproof jackets for under £60.

Market research carried out by Fellside shows that most of its customers are aged 55 and over, are retired and have a high disposable income. They walk at weekends and told Fellside that they want a jacket that will last for many years rather than a cheap fashion item.

Fellside advertises in a walking magazine that is read by 40 000 people each month and it sponsors a walking festival held near its shops each spring. It is now designing a lighter jacket with larger pockets and easier zips, features that customers in this group said they wanted.

(a)

Explain one benefit to a business of segmenting its market by location.

(b)

Fellside's customers are retired and have a high disposable income.

Explain how Fellside can use income segmentation to target its customers. You should use information in Item A in your answer.

(c)

Analyse two benefits for Fellside of using segmentation in a competitive market.

Question 3

5 marks
(a)

Which one of the following is a way of segmenting a market?

A Income
B Inflation
C Interest rates
D Revenue

(b)

Table 1 shows the number of customers in two market segments served by a small business.

Table 1

Market segment Customers in Year 1 Customers in Year 2
Aged under 30 1 250 1 500
Aged 30 and over 2 000 1 800

Using Table 1, calculate the percentage change in the number of customers aged under 30 between Year 1 and Year 2.

Show your workings.

(c)

Explain one disadvantage to a business of targeting only one market segment.