Customers: ● identifying market segments: location, demographics,…

The idea

Businesses identify market segments using various criteria: location (geographical area), demographics (population characteristics), lifestyle (hobbies and values), income (socio-economic status), and age. For instance, a luxury car brand targets high-income consumers, while a surf shop focuses on a coastal location and an active lifestyle. Once segments are identified, businesses use market mapping to plot competitors on a two-dimensional grid based on two key variables, such as price and quality. This visual tool helps entrepreneurs spot a gap in the market—an area with unfulfilled customer needs—and analyse the competition, allowing them to position their new product effectively to attract their target customers.

What earns the marks

• Identify the five key methods of segmentation: location, demographics, lifestyle, income, and age.
• Explain how a market map uses two variables, such as price and quality, to plot existing brands in a market.
• Describe how market mapping helps a business identify a gap in the market where customer needs are not currently being met.
• Analyse how understanding the competition through market mapping allows a business to differentiate its products and gain a competitive advantage.
• Evaluate the limitations of market mapping, such as its reliance on only two variables and the subjective nature of plotting competitors.

Common mistakes and how to put them right

• The error is limiting the definition of demographics to just age and gender; the correction is to state that demographics encompasses a wide range of population statistics, even though age and income are specified separately in the syllabus.

• The error is drawing or interpreting a market map without considering the axes; the correction is to ensure that every market map has two clearly defined, opposing variables on each axis, such as high price versus low price.

• The error is assuming that any identified gap in a market map represents a profitable opportunity; the correction is to acknowledge that a gap might exist simply because there is no actual customer demand for that specific combination of features.

Exam tips

• When asked to segment a market for a specific business in an exam scenario, choose the most relevant criteria, such as location for a local service business.
• Practice drawing and interpreting market maps using different pairs of variables, such as quality and price, or age range and product range.
• Use market mapping to justify a business decision, such as introducing a new product to fill an identified gap and avoid direct competition with established brands.