Segmenting the Market (AQA GCSE Business)
Revision Note
Why Businesses Segment the Market
Market segmentation involves a single market being divided into groups, each of which has distinct customer preferences
Each segment represents a slightly different set of consumer characteristics
Market segmentation allows businesses to target their marketing efforts at customers who are most likely to be interested in their products
This is an efficient use of the marketing budget
Customer needs are likely to be closely met, so they should be satisfied with their purchase
Satisfied customers are likely to be loyal and recommend the brand to other, like-minded customers
Once appropriate market segment(s) have been identified, a business can choose an appropriate targeting strategy
Often, businesses target their products a particular market segment
E.g. Ecover targets environmentally-conscious customers with its range of chemical-free housing cleaning products
Sometimes different products are aimed at several different market segments
E.g. Supermarket Tesco targets customers with different incomes with its own-brand ranges, such as Stockwell and Finest
In some instances, a business aims its product range at the mass market
E.g. Coca-Cola offers a range of products that, given their large volume of sales, could be considered to be aimed at the mass market
Businesses often use more than one way to segment the market
E.g. the UK crisp market is divided up into many market segments such as
Dinner party snacks (Walkers Sensations, Pringles, Burts) are targeted at middle- to upper-income professionals with a premium price
Health conscious crisps (Proper Chips, Walkers Baked, Ryvita Lite) are targeted at the health conscious market
Lunch box value snacks (multipacks, Hoola Hoops, Quavers etc) are targeted at families and the mass market
Types of Segmentation
Markets can be segmented in several ways
The main ways include location, demographics, lifestyle, income and age
Diagram: How To Segment Markets
Businesses can choose to segment markets by gender, age, location and income
1. Gender
Men and women often have different purchasing preferences
Men tend to spend more than women when shopping
Women are more price-conscious shoppers than men, buying more reduced-price items and using coupons more frequently
2. Age
Many products are aimed at different age groups, who are likely to have different interests, influences and spending power
E.g. In 2022, consumers in the United States spent an average of $1,945 on clothing, with most being spent by the generation born between 1965 and 1980, known as Generation X
As populations age, spending patterns are changing
Spending on specialist services such as personal care and single-person travel has increased significantly
3. Location
Urban and rural customers' needs relate to their surroundings
E.g. City-dwellers are likely to purchase small, electric vehicles, while those who live in the countryside tend to prefer larger, all-terrain vehicles
Customers in warmer countries make different purchasing decisions to those living in cooler climates
E.g. Sales of air-conditioning units in Italy and Turkey are significantly higher than in Germany and the UK
Within a country, customers living in different regions have varied preferences
E.g. France is well-known for its regional food specialties, with residents of southern départements generally preferring a Mediterranean diet, whilst those in more northern regions consume more dairy products and red meat
Many countries have increasingly ethnically-diverse populations
Markets for clothing, food and celebration items can be targeted at specific ethnic or religious groups
4. Income
Customers with different levels of income make different lifestyle choices
E.g. Travel companies target different packages at families, thrill-seekers and those looking to pursue a specific interest, such as cuisine or art
Some products are aimed at those on high incomes, whilst others target customers with limited budgets
E.g. Luxury brand Mulberry targets very high-income customers with its iconic handbags, whilst budget-conscious customers are served by brands such as H&M and Primark
Evaluation of Market Segmentation
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Examiner Tip
A common misconception is that customers that do not specifically fit within a market segment do not buy a business's products. Some businesses have enjoyed great success as a result of their products being purchased by those outside of the target market.
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