Business Revision Guide: 2.3

• Market segmentation


  Splitting the market for a product or service into different parts or segments
• Ways of segmenting the market

  • Location
  • Age
  • Gender
  • Income
  • Lifestyle
• Location


  • Business suits for people living and working in a city
  • Tweed for those living in the countryside
• Age

  • Magazines aimed at teenage girls
  • Magazines aimed at women in the 20 to 40 age range
• Gender


  • Different coloured running shoes for men and women
• Income


  • Patek Philippe watches for the very wealthy
  • Casio watches for low income customers
• Lifestyle


  • Lycra for the cycle enthusiast
  • Large flat screen TVs for viewing enthusiasts
• Advantages of market segmentation

  • Increased sales - design and produce products specifically aimed at groups
  • Helps identify gaps in the market - those not currently being targeted
  • Avoids wasting money - marketing will be focused on that specific group
  • Higher market share
• Disadvantages of market segmentation

  • Promotional costs might be high - different advertisements and promotions needed for different groups
  • Cost of market research for that specific group or to find out the market segment
  • Lack of information and data - some markets are poorly researched
  • Hard to reach customer segments sometimes
• People in different segments often want different kinds of products or services. Businesses need to know this so that they can target their products at the different needs of customers of each segment.
• Things a business needs to consider when targeting different market segments

  • Whether to produce different products for different markets
  • What price to charge - high or low?
  • How to promote the products - the type of media to use and what message
  • Where to locate shops - town centre, shopping mall, holiday resort - and whether to sell online or not?