How does developing descriptions of each market segment help firms?

• A. It reduces the need for market research and data collection.
• B. It allows firms to better target products and pricing to match consumers' willingness to pay.
• C. It enables firms to ignore consumer preferences and focus solely on production costs.
• D. It helps firms maximize consumer surplus by charging all customers the same price.

Answer: (B)

Verified step by step guidance

1. Understand that market segmentation involves dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics such as preferences, willingness to pay, or demographics.
2. Recognize that by developing detailed descriptions of each market segment, firms gain insights into the specific needs and behaviors of different groups of consumers.
3. Use these insights to tailor products and pricing strategies that align closely with each segment's willingness to pay and preferences, improving the effectiveness of marketing efforts.
4. Realize that this targeted approach helps firms allocate resources more efficiently, increasing the chances of higher sales and profits by meeting consumer demands more precisely.
5. Note that this strategy contrasts with a one-size-fits-all approach, where ignoring consumer differences can lead to suboptimal pricing and product offerings.