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Market Segmentation (Benefits & Pitfalls (Benefits to financial…

- - - - Sales should increase as a result of more effective marketing mix
        
        Effective marketing mix due to properly targeting segment
        
        More effective pricing
        
        Right service aimed at right segment
      - Banks can select and concentrate resources and marketing efforts on the potentially most profitable segments.
      - Therefore, there should be COST savings from better use of expensive items like labour and advertising, reduced product range and reduced marketing efforts on segments that are not targeted.
    - - Bank can undertake regular monitoring of the chosen segment, which can help highlight at an early stage, any developments and new marketing opportunities
    - - As staff develop expertise, it improves the bank's image amongst the chosen segments.
      - Example: Small businesses advisors can be employed by banks to deal effectively with the needs of this market segment.
    - - In a competitive environment, a bank may profit by creatively serving specific market sectors (market niches), whose needs are not fully met by competitors.
  - - - If a segment is difficult to identify or reach, there will be a tendency to ignore that segment in market planning.
      - The bank may fail to see if there are other similar segments that would fit in with this segment to create one large, profitable and accessible segment, thus missing out on potential business.
    - - If many financial organisations identify the same profitable segments, there may be cut throat competition which will drastically reduce profitability.
      - Therefore, there is a need to consider competitor presence and activity in selecting market segments.
    - - By specialising, the bank may put too many eggs into too few baskets, resulting in increased risks.
      - For example, a bank may: i) Choose the 'wrong' segments
        ii) Adverse economic conditions could affect a particular segment, leading to a greater loss than would have occurred with a more generalised approach.