How does a business split a market into groups and find a gap to aim at?
How businesses use market segmentation to target customers: identifying market segments by location, demographics, lifestyle, income and age, and using market mapping to identify a gap in the market and the competition.
A focused answer to Edexcel GCSE Business 1.2.3, covering how businesses segment markets by location, demographics, lifestyle, income and age, and how market mapping identifies a gap in the market and the competition.
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What this dot point is asking
Edexcel wants you to explain how a business segments a market into groups so it can target the right customers, and how a market map helps it spot a gap in the market and see its competition.
What market segmentation is
A business rarely appeals to everyone, so it picks a target market: the segment most likely to buy. Segmenting lets the business shape its marketing mix (product, price, promotion, place) around that group, which is far more effective and cheaper than trying to please the whole market at once.
For example, a premium gym might target customers segmented by income (higher earners) and lifestyle (fitness-focused), while a budget supermarket targets by income (price-conscious shoppers) and location (busy residential areas). Choosing the right segment is the difference between aiming a product at people who want it and wasting money on people who do not.
Market mapping
A typical map might use price (low to high) on one axis and quality or style (basic to premium, or traditional to fashionable) on the other. Each competitor is placed on the map according to where its product sits. The map then reveals two useful things.
A gap in the market is an area of the map (a combination of features, such as high quality at a low price) that customers might want but no business currently serves. Filling a gap means facing less direct competition. But a gap must be treated with care: an empty space might be empty because no one wants a product there, so the business should confirm there is real demand with market research before committing.
Try this
Q1. State one benefit to a business of segmenting its market. [1 mark]
- Cue. It can target and tailor its marketing to the group most likely to buy, rather than trying to please everyone.
Q2. Explain one way a market map could help a business. [3 marks]
- Cue. It shows where competitors cluster and where there is a gap, helping the business position its product where competition is lower.
Exam-style practice questions
Practice questions written in the style of Pearson Edexcel exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Edexcel 20192 marksState two ways in which a market can be segmented. (Paper 1, Section A)Show worked answer →
A 2-mark state question, one mark per correct method of segmentation.
Any two of: location, demographics, lifestyle, income, age. (Demographics covers measurable population features such as gender or family status; age and income are often listed separately by Edexcel.)
Markers want two distinct bases from the specification list. Pick two that are clearly different, for example "age" and "income".
Edexcel 20216 marksDiscuss how market mapping could help a new clothing business identify a gap in the market. (Paper 1, Section B)Show worked answer →
A 6-mark discuss question rewards developed application of market mapping, with a judgement on its usefulness.
How it helps: a market map plots competitors on two axes (for example low-to-high price and traditional-to-fashionable style). By placing rivals on the map, the business can see crowded areas and, crucially, empty spaces where few or no competitors sit. An empty space is a potential gap (for example high-fashion clothing at a low price) the new business could aim at, facing less direct competition.
A strong answer judges the limit: a gap on the map is only worth filling if customers actually want a product there and it can be made profitably; an empty space may be empty because there is no demand. So market mapping is a useful first step that must be confirmed with market research. Markers reward the developed link and the balanced judgement.
Related dot points
- Identifying and understanding customer needs (price, quality, choice, convenience) and the importance of identifying and understanding customers for generating sales and ensuring business survival.
A focused answer to Edexcel GCSE Business 1.2.1, covering what customer needs are (price, quality, choice, convenience) and why identifying and understanding customers matters for generating sales and business survival.
- The purpose of market research (to identify customer needs, find gaps in the market, reduce risk, inform decisions), methods of research (primary: survey, questionnaire, focus group, observation; secondary: internet, market and government reports), and the use of data (qualitative and quantitative, social media, reliability).
A focused answer to Edexcel GCSE Business 1.2.2, covering the purpose of market research, primary and secondary methods, and the use of qualitative and quantitative data, social media and the reliability of research.
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A focused answer to Edexcel GCSE Business 1.2.4, covering how a business judges the strengths and weaknesses of competitors (price, quality, location, product range, customer service) and how competition affects business decision making.
- What the marketing mix is and the importance of each element (price, product, promotion, place); how the elements work together, including balancing the mix for the competitive environment, the impact of changing consumer needs, and the impact of technology (e-commerce, digital communication).
A focused answer to Edexcel GCSE Business 1.4.3, covering what the marketing mix (product, price, promotion, place) is, the importance of each element, and how they work together, including the effects of competition, changing consumer needs and technology.
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Sources & how we know this
- Pearson Edexcel GCSE (9-1) Business (1BS0) specification — Pearson Edexcel (2017)