How does a business divide up its customers to target them better?
The meaning and purpose of market segmentation, the main ways a market can be segmented (age, gender, income, location, lifestyle), the idea of a target market, and the benefits of segmentation to a business.
A focused answer to AQA GCSE Business 3.5.2, covering the meaning and purpose of market segmentation, the main bases for segmenting a market, the target market, and the benefits of segmentation.
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What this dot point is asking
AQA wants you to explain what market segmentation is and why businesses use it, list the main ways a market can be divided, explain what a target market is, and give the benefits of segmentation.
What is market segmentation?
The reason businesses segment is that no single product can perfectly suit everyone: customers differ in age, income, taste and lifestyle, so a product aimed at "everybody" often appeals strongly to nobody. By splitting the market into groups with shared characteristics, a firm can design and promote a product that fits one group closely, which is more effective than a one-size-fits-all approach. Segmentation depends on good market research, because the firm must first understand the differences between customers before it can group them. It also links to the marketing mix: once the target segment is known, the product, price, promotion and place are all shaped around that group.
Ways to segment a market
The target market
Once a business knows its segments, it picks a target market and tailors its product, price and promotion to that group. Some firms target a broad mass market (everyday goods sold to almost everyone), while others target a small niche (a specialised segment with particular needs). A niche can be very profitable because customers in it often pay a premium and face less competition, but it is also riskier because the market is small. The choice of target market shapes everything that follows, so getting it right is one of the most important marketing decisions a business makes.
Benefits of segmentation
Try this
Q1. State two ways a market can be segmented. [2 marks]
- Cue. For example, by age and by income (also gender, location, lifestyle).
Q2. Explain one benefit to a business of segmenting its market. [2 marks]
- Cue. It can aim promotion at the right group, cutting wasted spend and raising sales.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20182 marksOutline what is meant by a target market. (Paper 2, Section B)Show worked answer →
A 2-mark outline question: a clear definition plus a consequence.
A target market is the specific group of customers a business chooses to aim its product and marketing at. The consequence is that the business can tailor its product, price and promotion to that group's needs rather than trying to appeal to everyone, which makes its marketing more effective.
Markers reward the core meaning (the chosen group of customers a firm aims at) plus a link to tailoring the marketing to them. A bare definition with no development may still score both marks if precise.
AQA 20219 marksA drinks company is launching a new energy drink. Analyse how market segmentation could help the company market the drink successfully. (Paper 2, Section C)Show worked answer →
A 9-mark analyse question rewarding developed chains applied to the energy drink.
Chain one, targeting the right customers: by segmenting on age and lifestyle, the company can identify young, active or sporty consumers as its target market, then design the product (flavour, packaging) and promotion (social media, gym sponsorship) to appeal directly to them, raising the chance of strong sales.
Chain two, cutting wasted spend: aiming promotion only at the chosen segment avoids spending money advertising to people unlikely to buy, making the marketing budget go further. Develop each chain to a consequence. A strong answer notes segmentation must be based on accurate research to pick the right segment. Markers reward developed application to the drinks company, not a list of segmentation bases.
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Sources & how we know this
- AQA GCSE Business (8132) specification — AQA (2017)