What primarily determines whether to segment or combine markets?

The decision to segment or combine markets is primarily influenced by potential profitability because this factor directly impacts the overall success and sustainability of a marketing strategy. When companies evaluate the profitability linked to different market segments, they look for opportunities where they can maximize revenue and minimize costs.

If a market segment shows a higher potential for profitability, it may be advantageous to develop tailored marketing strategies that address the specific needs and preferences of that segment. Conversely, if a market segment demonstrates low profitability potential, a business may decide either to combine it with other segments to achieve economies of scale or exit that market altogether.

Market size can influence decisions, but it is primarily the profitability derived from that size that drives the strategy. The cost of production is also significant, but it is typically assessed within the context of potential profitability. Likewise, consumer trends may indicate shifts in preferences, and while they can inform strategies, they are used as a means to enhance the profitability of a chosen market segment rather than being the primary determinant.