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What is a benefit of market segmentation?

Market segmentation is when the market is broken down into categories with customers who hae similar characteristics such as age, tastes or location.

A benefit of this is that the business can chose a target market. Some businesses are niche, which means that they appeal only to a small number of people. For example, Tim is planning to open a new health food store on the high street. In order for him to successfully advertise to those who would be interested in this, he would need to segment the market of his town. This would be segmentation according to lifestyles, otherwise known as psychographic segmentation. Only advertising to this segment will save advertising costs and means that Tim has the potential to build close relationships with this small group, which is useful for his new business to encourage repeat purchases.

Tia L. GCSE Business Studies tutor, A Level Business Studies tutor

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