Final answer:
Service companies divide their target markets based on criteria such as profitability, behavior, usage, volume, and user characteristics to maximize profitability and efficiency. Discriminating against certain customer segments could lead to profit loss and a competitive disadvantage. Market pressures and the drive for profit encourage non-discriminatory, economically-focused business decisions.
Step-by-step explanation:
The question deals with how service companies segment their target markets to serve customers with different needs and attributes. Service companies may divide their target markets based on various criteria such as current and/or future profitability, behavior, usage, volume, and user characteristics. This segmentation allows businesses to tailor their services and marketing strategies to different groups, thereby maximizing efficiency and profitability.
For example, businesses might focus on serving the most profitable customers more intensively or offering different levels of service at different price points to match customer value. Ignoring certain customer segments, such as minorities in areas with a large minority population, can negatively affect profits and lead to competitive disadvantages. Businesses are incentivized to make decisions based on economic factors, rather than discriminatory practices, due to market pressures. In competitive markets, businesses that demonstrate discriminatory behavior, like underpaying women and/or minorities, may lose these workers to employers who recognize their productivity and offer equitable pay.
Product differentiation and monopolistic competition arise when there is a variety of styles, flavors, locations, and characteristics in the market. This diversity allows businesses to segment the market and offer different products or services to meet the specific demands of various consumer groups.