IBDP Design Technology - 9.2 Market sectors and segments

Innovation and Markets / 9.2 /
Market Sectors and Segments

Designers must research and consider the target market sectors and segments in the design of their products. Designers must consider the market when targeting their product, service or system. The smaller the sector, the more the target audience will have in common. Companies may decide to compete in the whole market or only in segments that are attractive and/or familiar. A designer’s understanding of the identified market is essential.

9.2.0 | Market Segmentation

Market sectors are broad categories of economic activity that share similar characteristics. For example, the technology sector includes companies that develop and sell software, hardware, and other technology products and services. Other market sectors include healthcare, consumer discretionary, financials, and industrials.

Market segments are smaller groups of customers within a market sector who have similar needs, wants, and behaviours. For example, the technology sector could be segmented into consumers, businesses, and governments. The consumer segment could be further segmented into gamers, mobile users, and enterprise users.

9.2.1 | Categories of market sectors

Tissot vs Swatch Watch – Targeting a sector or a segment?

Market sectors can be categorized in a number of ways, but the most common method is the Global Industry Classification Standard (GICS). GICS is a hierarchical classification system that groups companies into 11 sectors, 25 industry groups, and 74 industries. The 11 GICS sectors are:

Consumer Staples: This sector includes companies that produce and sell essential goods, such as food and beverage, household products, and personal care products.
Consumer Discretionary: This sector includes companies that produce and sell non-essential goods, such as apparel, electronics, and leisure products.
Healthcare: This sector includes companies that provide healthcare products and services, such as pharmaceuticals, medical devices, and healthcare services.
Industrials: This sector includes companies that produce and sell industrial goods, such as machinery, construction materials, and transportation equipment.
Information Technology: This sector includes companies that develop and sell software, hardware, and other technology products and services.
Materials: This sector includes companies that produce and sell raw materials, such as metals, chemicals, and forest products.
Real Estate: This sector includes companies that develop, own, and manage real estate properties.
Financials: This sector includes companies that provide financial services, such as banking, insurance, and investment services.
Communication Services: This sector includes companies that provide communication services, such as telecommunications, media, and entertainment services.
Utilities: This sector includes companies that provide essential utility services, such as electricity, water, and gas.
Energy: This sector includes companies that produce and sell energy products, such as oil, natural gas, and renewable energy.

Another way to categorize market sectors is by geography: the geographic region in which they operate.

Businesses can choose to categorize market sectors in the way that best suits their needs. For example, a company that sells consumer goods might categorize market sectors by product category, such as food and beverage, apparel, and electronics. A company that provides financial services might categorize market sectors by customer type, such as individuals, businesses, and institutions.

9.2.2 | Classification of consumer market segments

Market segments are commonly classified by characteristics such as income, profession, age, family, values and behaviour. By dividing up a market into segments, a company can target each individually through promotional campaigns. The segmentation allows the company to focus on particular characteristics and wants of the consumers and allows it to better relate its products to them.

9.2.3 | The influence of market segments

Businesses can use market sectors and segments in a number of ways:

Understanding the needs of the target market - This can be done through market research, such as customer surveys, interviews, and focus groups. By understanding the needs of their target market, companies can design and manufacture products that meet those needs.
Determining specific functional requirements of the market sector - Different market sectors have different requirements for the products that they use. For example, products used in the healthcare sector need to be highly reliable and sterile. Products used in the industrial sector need to be durable and able to withstand harsh conditions.
Using the right materials and components - The materials and components used in a product can have a significant impact on its performance, durability, and cost. Companies need to choose the right materials and components for their products based on the requirements of the market sector they are targeting. For example, products used in the aerospace sector need to be made from lightweight and durable materials. Products used in the electronics sector need to be made from high-precision components.
Quality standards and regulations - Companies need to manufacture their products to a specific quality standards in order to meet the expectations of their customers in the target market sector. This may require using state-of-the-art manufacturing processes and equipment. Or having a rigorous quality control system in place.
The size of the market segment - The size of the market segment will have a direct impact on the scale of production. A larger market segment will require a larger scale of production to meet the demand.
The growth potential of the market segment - A market segment with high growth potential will require a larger scale of production in the future to meet the growing demand. For example, a company that sells electric vehicles (EVs) is likely to need to scale up its production in the coming years as the EV market continues to grow.
Profitability of the market segment - A more profitable market segment will justify a larger scale of production. For example, a company that sells luxury cars is likely to produce fewer cars than a company that sells mass-market cars, but each luxury car will be more profitable.
Level of competition in the market segment - In a highly competitive market, businesses may need to produce larger volumes of products, benefiting from economies of scale, to maintain their market share.

In Korea, special kimchee fridges are designed to keep this fermented food at the optimum temperature. Because of the cultural importance of this food, there is a strong domestic market for these types of fridge, but a very limited international market.

In China, there was a need of low-cost street commuter bicycles (no gears, basket, simple brakes) to cater for a market segment of low-income earners which is a large target market.

Mont Blanc pens target a market segment of middle to high income earners and possibly business men and women. These would be batch produced. The cheapest at an UK online pen store in April 2015 was £170. Whereas a a box of 60 Bic pens in the USA costs $15. These would be volume produced.

9.2.4 | Development of a product family

A product family is a group of products (usually developed by a single producer) that target different market segments, but share as many properties as possible at the same time. Members of a product family often have many common parts, are branded consistently and/or share aesthetic characteristics. Designers often develop product families to extend a successful product range.

If a designer or manufacturer has success with a particular product, and consumers become familiar with it and trust the product and brand, the designer or manufacturer may take the opportunity to create associated products which will start to form a product family. If a consumer has a good experience with a particular product or brand, they are more likely to purchase another product from the same manufacturer. Developing a product family is also a way for a company to diversify their product range and increase sales across different markets.

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