Read the information below about a sportswear business. Its online market research identifies three groups: competitive runners who value performance fabric...
Question 1 Report
Read the information below about a sportswear business. Its online market research identifies three groups: competitive runners who value performance fabrics, gym beginners who want low prices, and people who buy clothing mainly for casual wear. The business must choose one segment for a new advertising campaign with a budget of $12 000.
(a) Identify the segment most likely to value performance fabrics. [1]
(b) What type of market segmentation is based on customers' main reason for buying sportswear? [1]
(c) Explain one reason why the business should estimate the size of each segment before selecting its target market. [2]
(d) Explain one reason why the competitive-runner segment may still be selected even if it is smaller than the casual-wear segment. [3]
Answer Details
(a) Competitive runners are most likely to value performance fabrics. [1]
(b) Segmentation based on the main reason for buying is behavioural segmentation, also called benefit segmentation. It groups customers according to the benefit they seek from a product. [1]
(c) The size of a segment shows the number of possible customers. This helps the business estimate likely sales and decide whether enough sales could be generated to recover the $12 000 advertising cost. [2]
(d) Competitive runners may be willing to pay higher prices for specialist performance products. This can create a higher profit margin on each sale. Therefore, even though the segment is smaller than casual-wear buyers, it may generate more profit overall and better meet the business objective. [3]
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