Types of markets and market segmentation: mass and niche markets, local to global markets, consumer and industrial markets, the bases of segmentation, and the concept of market size, growth and share.

What this dot point is asking

WJEC Unit 1 expects you to classify markets (mass versus niche, local to global, consumer versus industrial), to explain how and why a business divides a market into segments, and to handle the related ideas of market size, growth and share. Strong answers do not just define the terms; they explain the consequences of choosing a mass or niche approach and the practical benefits and costs of segmentation.

The answer

Types of market

Mass versus niche

A mass market aims at a large proportion of all customers with a standardised product, competing on price and relying on high volume. A niche market targets a small, specific group with particular needs, usually at a premium price and lower volume. Mass markets benefit from economies of scale but face heavy competition; niche markets face less competition and can charge more but are vulnerable if the segment shrinks or a large rival enters.

Local to global

A local market serves a small area (a village shop), a national market the whole country, and a global market customers worldwide. Selling globally widens the customer base but adds cost, complexity and exposure to exchange-rate and cultural risk.

Consumer versus industrial

A consumer market sells goods and services to households for personal use. An industrial (business-to-business) market sells to other firms, often in larger quantities and through different buying processes (negotiation, contracts).

What market segmentation is

The bases of segmentation

A market can be segmented in several ways, and good answers name them:

• Demographic - by age, gender, income, occupation, family size or social class.
• Geographic - by region, urban or rural location, or climate.
• Psychographic - by lifestyle, values, attitudes and personality.
• Behavioural - by usage rate, brand loyalty, benefits sought or the occasion of purchase.

A firm often combines bases, for example targeting higher-income, health-conscious customers in cities for a premium organic product.

Market size, growth and share

These three measures describe a market and a firm's position in it:

• Market size - the total value or volume of sales in the market.
• Market growth - the percentage change in market size over a period; a growing market offers more opportunity.
• Market share - one firm's sales as a percentage of total market sales, a key measure of competitive success.

Examples in context

Example 1. A niche premium producer. A small Welsh artisan cheese maker targets a niche of food-conscious, higher-income consumers who will pay a premium for a distinctive, locally made product. Because the segment is specific and values quality over price, the firm faces less direct competition than a mass dairy and can charge more, but it is vulnerable if the niche shrinks or a supermarket launches a cheaper imitation. This illustrates the niche approach and demographic/psychographic segmentation in practice.

Example 2. A mass-market retailer using segmentation. A national supermarket chain serves a mass market but still segments it: it stocks a value range, a standard range and a premium range to match different income groups, and tailors local stores to the surrounding area. This shows that mass and segmented approaches are not opposites - a firm can sell to a mass market while dividing its offer to match the demographic and behavioural segments within it.

Try this

Q1. Define the term market segmentation. [2 marks]

• Cue. Dividing a market into smaller groups of customers with similar characteristics or needs, so the firm can target each group with a suitable product, price and promotion.

Q2. A firm sells £3 million in a market worth £25 million. Calculate its market share. [2 marks]

• Cue. (3 / 25) x 100 = 12% market share.