Market segmentation — Edexcel GCSE Business
Verified courseTeaching note checked against the official specification.
Market segmentation explained
Market segmentation covers 2 specification points, including How businesses use market segmentation to target and ● identifying market segments: location,….
Read the full explanation
Open a point below for its explanation and revision guidance.
How businesses use market segmentation to target
Market segmentation involves dividing a broad target market into smaller, more defined groups of consumers who share similar characteristics, needs, or interests. By understanding these distinct segments, businesses can tailor their products, services, and marketing campaigns to meet the specific demands of each group. This targeted approach allows firms to allocate their resources more efficiently, rather than using a mass-marketing strategy that might not appeal to everyone. For example, a clothing retailer might segment its market to offer different product lines for teenagers and working professionals, ensuring that promotional messages resonate strongly with the intended audience and ultimately increasing sales and customer loyalty.
customers: ● identifying market segments: location, demographics, lifestyle, income, age ● market mapping to identify a gap in the market and the competition.
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.
Your focus
- Define the concept of market segmentation.
- Explain the purpose of targeting specific market segments.
- Analyse the benefits of using market segmentation to target customers.
Show all 6 objectives
- Identify different methods used to segment a market, including location, demographics, lifestyle, income, and age.
- Construct and interpret a market map to analyse the competition within a specific market.
- Evaluate the usefulness of market mapping in identifying a gap in the market.
Market segmentation exam tips
Marking Points
- Define market segmentation as the process of dividing a market into distinct groups of buyers with different needs or characteristics.
- Explain that targeting involves selecting one or more of these segments to enter and focus marketing efforts upon.
- Identify that segmentation allows businesses to create tailored marketing mixes that appeal directly to the chosen target market.
- Discuss how effective targeting can lead to increased sales, better customer retention, and more efficient use of marketing budgets.
- 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.
Examiner Tips
- 💡Always link the concept of segmentation to how it helps a business meet customer needs more accurately and efficiently.
- 💡Use the context provided in the case study to explain why a business has chosen to target a specific segment rather than the whole market.
- 💡When evaluating segmentation strategies, consider the additional costs involved in researching and developing products for multiple specific target markets.
- 💡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.
Common Mistakes
- The error is using the terms segmentation and targeting interchangeably; the correction is to define segmentation as dividing the market into groups, and targeting as the subsequent step of choosing which specific group to focus marketing efforts on.
- The error is stating that segmentation alone automatically increases sales; the correction is to explain that segmentation must be followed by effective targeting and a suitable marketing mix to achieve commercial success.
- The error is claiming that mass marketing is always an inferior strategy; the correction is to recognise that mass marketing can be highly effective for generic products, whereas segmentation is better suited for differentiated products.
- 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.