Segmentation at Flavor Cupcakery A small-business entrepreneur recently opened a small bakery named Flavor Cupcakery that creates high-quality cupcakes from premium ingredients such as sweet cream butter and European chocolate.

Flavor Cupcakery markets its fresh cupcakes as not only flavorful and delicious, but also beautiful and fun. Now that the owner has established the menu and resolved the production issues, she begins work on her marketing strategy.

One of the first marketing decisions she faces is whether or not to segment her market. It's not always a good idea to segment a market. Grouping potential buyers into meaningful segments involves meeting some specific criteria that answer the questions: "Would segmentation be worth doing?" and "Is it possible?" If so, a marketer must find specific variables that can be used to create these various segments.

Read the case below and answer the questions that follow. In 2007, Sue began baking cupcakes for her friends' and families' birthday parties and special occasions. Her use of quality ingredients and unique flavor combinations, like salted caramel and Boston crème pie, quickly drew fans.

As word spread and requests for her cupcakes for special events and parties rolled in, the idea behind Flavor Cupcakery was born. Sue located space for a commercial kitchen and began interviewing bakers to help her satisfy orders that were far too numerous to fill from her small, home-based kitchen.

To further grow her business and increase cupcake sales, Sue has secured a storefront, launched a new website, and is now focusing on marketing for Flavor Cupcakery. She must evaluate the potential market for her cupcake sales, which has been small up to this point. Flavor Cupcakery relies primarily on word-of-mouth promotion and a steady influx of smaller orders of one to two dozen cupcakes per private event.

Sue is determining whether she should pursue larger cupcake orders of five dozen or more, which would bring Flavor Cupcakery into the business market of corporate events and gatherings. Expanding from a one product, single market segment strategy to a one product, multiple market segment strategy will increase Sue's marketing expenses, which have been kept low through her established word-of-mouth network and website traffic.

However, the increased expenses to reach the business market-e.g., through print media and advertising in local business magazines and publications that Sue has identified-have the potential to increase her average order from $56 to $140.

To determine the feasibility of pursuing the business market segment, Sue must consider these five essential segmentation criteria:

1. Simplicity and cost effectiveness of assigning potential buyers to segments

2. Potential for increased profit

3. Similarity of needs of potential buyers within a segment

4. Difference of needs of buyers among segments

5. Potential of a marketing action to reach a segment Keep these criteria in mind as you answer the questions to decide whether or not Flavor Cupcakery should pursue the business market segment.

1. Adding the business market segment will likely ___________.

decrease Flavor Cupcakery's annual sales

have no effect on Flavor Cupcakery's annual sales

increase Flavor Cupcakery's annual sales

2. Generally speaking, whether a potential customer should be assigned to the consumer market segment or the business market segment will be __________.

easy for Sue to determine

impossible for Sue to determine

difficult for Sue to determine

unimportant to Sue's segmentation strategy

3. To target the new business market, Flavor Cupcakery would likely rely on __________ for its promotional campaign.

advertising in business publications

customer loyalty cards

word-of-mouth

4. How do the needs of customers in the business market segment compare to the consumer market segment?

The needs of the business market segment are very similar to that of the consumer market segment.

The needs of the business market segment are quite different than the needs of the consumer market segment.

There is no difference between the needs of the business market segment and the consumer market segment; they require the same things.

5. The needs of customers within the business market segment are likely _________ one another.

unrelated to

similar to

different from