Market Segmentation
Business: Edexcel IGCSE, topic 4.2.5
Market Segmentation
Market segmentation is the process of dividing potential customers into different groups based on characteristics like age, gender, income and much more. Businesses use market segmentation for a variety of reasons:
Choosing market mix
- When choosing the product, geographic, promotional and price segmentation can help a business to understand its customers’ needs and wants.
- For example, Next provides clothing aimed at infants and toddlers using its Next Kids range.
Choosing promotion
- Advertising in a newspaper probably is not the best way to target teenage girls, but a teenage magazine like Bliss might be.
- Segmenting a market can give businesses ideas about how best to promote their products.
Market mapping
- Market mapping is a process to identify a gap in the market by looking at what competitors offer.
Methods of Market Segmentation
Customers can be segmented based on lots of different variables:
Gender
- Some products are aimed primarily at either males or females.
- Boohoo.com is an online fashion retailer that primarily targets females. Advertising to lots of males may not be the most effective strategy.
Age
- Products can be aimed at a specific age range.
- A business is unlikely to advertise mobility scooters to people under 40.
Location
- Customers’ wants and needs often change based upon where they live or where they are born.
- There are many supermarkets focusing on Polish food on some high streets in the UK.
- It makes more sense for these supermarkets to locate where there are lots of Polish families living.
Income
- Certain products (luxury products) need to be aimed at people who earn a certain amount of money.
- For example, high end kitchens (priced at £20,000) are more likely to be effective advertising in magazines like Ideal Home or the Sunday Times because these magazines tend to have readerships with high incomes.
Test yourself on Market Segmentation
If a cruise ship business wanted to target the elderly segment, which promotion channel would make the most sense?
Which market segment is being targeted by an advert showing a 30-year-old lady washing her hair?
Which market segment is being targeted by a Skittles advert showing the candy being eaten by a teenager?
What variables can be used to segment customers in a market?