Which of the following is an advantage of a multisegment targeting strategy in economics?

• A. It limits the firm's ability to respond to changes in consumer preferences.
• B. It allows firms to diversify their market risk by serving multiple segments.
• C. It reduces the need for market research and customer analysis.
• D. It decreases the overall costs of production by focusing on a single product.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what a multisegment targeting strategy means. It involves a firm targeting multiple distinct market segments with different products or marketing mixes, rather than focusing on just one segment.
2. Step 2: Analyze the implications of serving multiple segments. Serving multiple segments allows a firm to spread its risk because if one segment's demand falls, others may still perform well, thus diversifying market risk.
3. Step 3: Consider the opposite options. Limiting the firm's ability to respond to changes in consumer preferences is generally a disadvantage, not an advantage, so this option is unlikely to be correct.
4. Step 4: Evaluate the impact on market research and customer analysis. Serving multiple segments usually increases the need for market research and customer analysis, as the firm must understand different customer groups, so reducing this need is not an advantage.
5. Step 5: Reflect on production costs. Focusing on a single product typically decreases production costs due to economies of scale, so a multisegment strategy usually increases costs rather than decreases them.