Drill 8 ·
AP Business with Personal Finance: Marketing to Customers (Drill 8) is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
This drill covers market segmentation and target-market selection; it uses an invented company and original figures.
Halden & Crowe Books is an independent bookstore deciding which customer group to focus its marketing on next year. The owners compiled a snapshot of four customer segments in their area, showing the number of households in each, the average amount each household spends at the store per year, and a fit score (1 to 100) estimating how well each segment matches the store's strengths in literary fiction and author events.
Customer segment snapshot
| Segment | Households | Avg annual spend | Fit score |
|---|---|---|---|
| Students | 4,200 | $38 | 45 |
| Young families | 3,100 | $72 | 60 |
| Retirees | 2,600 | $95 | 80 |
| Educators | 1,800 | $110 | 90 |
Question 1. Which segment has the largest number of households?
Explanation: Students is correct (A): at 4,200 households it is the largest segment in the table, ahead of Young families (3,100), Retirees (2,600), and Educators (1,800). The question asks only about household count, not spending or fit.
Question 2. Dividing customers into groups such as students, families, and retirees so the store can target its marketing is an example of what marketing concept?
Explanation: Market segmentation is the right term (B): it means dividing a broad market into defined groups that share characteristics so marketing can be aimed at the most promising group. Supply chain management (A) concerns sourcing and delivery, not customer grouping. Penetration pricing (C) is a pricing tactic. Product positioning (D) is about the image a product holds in customers' minds, which comes after a segment is chosen.
Question 3. What is the annual revenue potential of the Young families segment (households x average annual spend)?
Explanation: The answer is $223,200 (D): 3,100 households x $72 average annual spend = $223,200. $159,600 (A) is the Students figure (4,200 x $38), $198,000 (B) is Educators (1,800 x $110), and $247,000 (C) is Retirees (2,600 x $95).
Question 4. Why might the Educators segment be the most attractive target if the owners care most about strategic fit and spending per household, despite being the smallest by household count?
Explanation: A is the best answer: Educators combine the highest fit score (90) with the highest average annual spend ($110), so even though the segment is small it is well matched to the store's literary-fiction and author-event strengths and each household spends more per year than any other segment. B is false because Educators has the fewest households, not the most. C misreads the table; Educators has the highest average spend, not the lowest. D is false because Students, at a fit score of 45, is the only segment below 50.
Question 5. Suppose the owners instead prioritize the segment with the highest total annual revenue potential, regardless of fit. Which segment should they target?
Explanation: Retirees is correct (C): its revenue potential is 2,600 x $95 = $247,000, the highest of the four (Students $159,600; Young families $223,200; Educators $198,000). Educators (D) has the best fit and the highest per-household spend, but its small size caps total potential at $198,000, so it does not win on total revenue. This contrasts with Q4: the fit criterion and the total-revenue criterion point to different segments, which is the heart of the targeting tradeoff.