2019 Trial Extended Response

Analyse the relationship between market segmentation and marketing strategies

Market segmentation refers to the process of breaking down a total market into a market
based on the similar characteristics of a customer group. Marketing strategies refer to the
strategies utilized by the business to effectively promote, price, and place their product in
order to maximise profitability. Market segmentation involves the division of the market into
groups based on demographic, geographic, behavioural, and psychographic characteristics
in order to increase market share and profitability by catering to the specific characteristics of
consumers. The marketing strategies effectively aid in the success of a business’
segmentation, implementing such strategies to improve their overall service towards these
groups. McDonald’s is an effective modern example of a successful relationship between
both the segmentation of the market and the strategies which further this, introducing a
range of strategies to improve the market share of the business and therefore cater towards
segmented groups.

The demographic segmentation of the market involves dividing the market based on age,
gender, income, family size and level of education. This can be seen within McDonald’s
‘Loose Change Menu’, which was adopted by the company to cater towards those within the
demographic of a lower income group through the cheaper pricing of items on the menu.
Price refers to the pricing of a product or service at a level that reflects customer value,
meaning that businesses should appropriately price their products in order to increase sales
and attract a wider range of customers. Through McDonald’s implementation of a loose
change menu only selling items that are able to be purchased cheaply with ‘loose change’,
they have utilized the pricing strategy of penetration to target the demographic segmentation
of a low income group by charging below market prices for their products. This ultimately
allows those within the low income demographic to have more freedom when purchasing
food at McDonald’s, providing the company with a more holistic image and successfully
implementing marketing strategies of pricing to aid in their segmentation of the market.

The psychographic segmentation of the market refers to the division of the market based on
consumers' lifestyles, personalities, values, and interests. This is evident within the separate
McCafe addition within McDonald’s restaurants, which was implemented by the business in
order to cater towards individuals who have differing interests or lifestyles compared to the
average customer, selling coffee and bakery goods in order to expand their product range.
Products refer to the items which are sold to customers and aim to benefit them through
ways of physical and psychological characteristics. The marketing of products can be done
through branding and packaging, which both aim to increase consumer awareness and
overall profitability. The McCafe addition to McDonald’s stores aims to target the
psychographic market segmentation of those who behold different interests and
personalities, using a cafe as a middle-ground to increase overall brand awareness and
exposure. Through this, McDonald’s have implemented the product strategy of branding to
identify McCafe products as different to the fast food typically sold at McDonald’s, but still
under the same brand to target individuals who have different tastes and interests in food.
Thus, allowing the company to expand its consumer base, catering towards psychographic
market segmentations and utilizing product strategies such as branding to increase
profitability and consumer awareness.

The geographic segmentation of the market refers to the division of the market based on
location, including nations, states, and local government areas. McDonald’s has achieved
this through their adoption of halal menus across Western Sydney, utilizing the promotion of
halal foods to cater towards the Muslim consumer base of a geographically segmented
group. Promotion of products as a strategy refers to the methods used by a business to
inform, persuade and remind customers about their products, involving advertising, personal
selling, publicity and public relations, and sales promotions. In the case of McDonald’s halal
menu, they have used the strategy of public relations to create a favourable relationship
between them and those within the geographical segmentation of Western Sydney. The halal
menu adopted by McDonald’s aims to target the expanding muslim population found in
Western areas of Sydney, promoting muslim-friendly products through public relations to
develop consumer awarenes and therefore expand their market across Sydney, increasing
market share and profitability amongst geographically segmented populations. This allows
the company to not only expand its menu, but also its consumer base, utilizing promotion to
highlight the relationship between marketing strategies and the segmentation of the market
geographically.

Therefore, through the variety of market segmentation measures utilized by McDonald’s

such as McCafe, the loose change menu, and halal menu, they have successfully
showcased the relationship between segmentation and marketing strategies through their
use of promotion, product expansion, and pricing to effectively manage their segmentation of
the market as a whole.