Market Segmentation (Edexcel IGCSE Business)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
How Businesses use Market Segmentation
Market segmentation is the process in which a single market is 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 aim 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 that 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 earners/professionals with a premium price
Health conscious crisps (Walkers lite, Walkers baked, Revita lite) are targeted at the health conscious market
Lunch box value snacks (multipacks, hoola hoops etc) are targeted at families and the mass market
Ways to Segment the Market
Markets can be segmented in several ways
The main ways include location, demographics, lifestyle, income and age
Diagram: Ways to Segment Markets (requested edit)
Businesses can choose to segment markets in a variety of ways
1. 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
2. Demographics
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
As populations age, spending patterns are changing
Spending on specialist services such as personal care and single-person travel has increased significantly
Many countries have increasingly ethnically-diverse populations
Markets for clothing, food and celebration items can be targeted at specific ethic or religious groups
3. Lifestyle & Income
Customers make different lifestyle choices
E.g. Travel companies target different packages at families, thrill-seekers and those looking to pursue a specilaist 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
4. 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
The Advantages & Disadvantages of Market Segmentation
Advantages | Disadvantages |
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Examiner Tips and Tricks
You could be asked to outline the way a business segments the market at which it aims its products. You will find clues in the case study which you should refer to in your answer as 'outline' questions require application.
Recommending a Method of Segmentation
The type of market segmentation used will depend upon the nature of the business itself
Examples of industry specific segmentation include
The cosmetic industry often aim their products at a specific gender. In recent years, there has been a growth in specific make-up products aimed entirely at men, such as 'Guyliner'- eye liner for men
A bespoke watchmaker may base their segmentation on income levels, aiming at high income customers who can afford their handmade, niche market pieces
A business that runs boot camp style exercise classes may base their segmentation on lifestyle choices E.g. those people who want to improve their fitness levels
Before recommending an appropriate method of market segmentation the business must also consider a number of factors
Factors Affecting Choice of Market Segmentation
Factor | Explanation |
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Brand image |
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Cost of entry into the market segment |
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Market analysis data |
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