Market segmentation is a core marketing topic that links directly to the marketing mix. Exam questions ask you to explain how a business divides its market, why it targets a particular group and how that affects its product, price, place and promotion. This guide covers the key ideas with examples.
What Is Market Segmentation?
Market segmentation means dividing a market into groups of customers who share similar needs, characteristics or behaviour. Businesses can then design products and marketing for each group instead of trying to sell the same thing to everyone.
Types of Segmentation
- Demographic: age, gender, income, occupation, family size.
- Geographic: city, region, urban or rural, climate.
- Psychographic: lifestyle, values, interests.
- Behavioural: usage rate, loyalty, benefits sought.
Segmentation, Targeting and Positioning
- Segment: divide the market into groups.
- Target: choose the segment or segments to serve.
- Position: create an image in customers’ minds that is different from competitors.
For example, a clothing brand may target young professionals in large cities with premium workwear, and position itself on quality and style rather than lowest price.
Mass Market vs Niche Market
Mass market businesses sell to a large, broad group, usually with lower prices and high volume. Niche market businesses focus on a small specialised segment and often charge higher prices. Niche markets face less competition but have limited growth.
Benefits and Limitations
Benefits: better targeting, more effective promotion, higher customer satisfaction, and the chance to charge higher prices in some segments. Limitations: research can be costly, smaller segments may not be profitable, and customer tastes change. Use these when evaluating.
Link to the Marketing Mix
Once a segment is chosen, every element of the marketing mix should match it. A student-focused phone plan, for example, will have a low price, online sales channels and social media promotion.
Exam Tips
Always name the segment and the basis of segmentation, then link it to a decision in the case study. To evaluate, judge whether the segment is large and profitable enough and whether the business can reach it.
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Frequently Asked Questions
What is market segmentation?
It is dividing a market into groups of customers with similar needs or characteristics so a business can target them more effectively.
What are the main bases of segmentation?
Demographic, geographic, psychographic and behavioural segmentation.
What is the difference between a mass market and a niche market?
A mass market is large and broad with high volume. A niche market is a small specialised segment, often with higher prices and less competition.
What is the difference between targeting and positioning?
Targeting is choosing which segment to serve. Positioning is how the business wants customers to see its product compared with competitors.
