Marketing: Market research: Market segmentation - CCEA

Key facts about market segmentation

Market segmentation divides a business's target market into groups based on:

• age
• gender
• income
• geography
• lifestyle

This helps businesses develop and market products more effectively, targeting the right customers to meet their needs and boost sales.

It is very important for a business to identify and understand their customers. Businesses use a process called segmentation to help them achieve this. How are markets segmented?

Market segmentation is the process of splitting a business’ target market into different groups. Businesses use these groups to make it easier for them to develop products aimed at certain people and to help them target their marketing. Small businesses typically split up their target market based on age, gender, income, geography and lifestyle.

What is demographic segmentation?

Age and gender fall under a wider type of segmentation known as demographic segmentation, which considers the characteristics of people. Businesses consider the demographics of the people to whom they want to market their products. For example, a make-up business might target females aged 19–35 in the UK for a certain type and style of make-up. Other examples include toys for children, pension plans for people aged over 60 and cars for people aged 17 or above.

What is income segmentation?

Income segmentation considers how much people earn and how much disposable income they have. This is extremely important for certain products. For example, a business selling high-end luxury cars or expensive jewellery would need to target people with a high level of income. However, a budget brand of baked beans may target customers with a low level of income.

What is geographical segmentation?

Splitting up a market by location is also known as geographical segmentation. This is used to split up a target market based on where people live. A business may choose to target customers in its local area, or it may consider what types of products would sell in specific locations. For example, surfers in Portrush may be more interested in buying surf boards than people living in Omagh.

What is lifestyle segmentation?

Lifestyle segmentation considers what sorts of lives the people in a business’ target market lead. This may take into account hobbies, sporting interests and other things customers do in their spare time. For example, a camera equipment retailer may want to target customers who are interested in photography, or a cricket bat manufacturer may want to target people with an interest in cricket.

The main aim of market segmentation is to divide mass markets. Businesses do this to target the right products at the right people, to satisfy customer needs, and to increase sales and profits.

Dividing mass markets means that businesses split customers into subcategories to provide them with a focus when developing products and undertaking marketing activities.

Targeting the right products at the right people

Targeting the right products at the right people is very important. Getting this right means that businesses are less likely to waste money on marketing and promotion.

Satisfy customer needs

Customers have different needs and requirements that must be satisfied by businesses. Customer needs change constantly so it is important that businesses are able to keep up with and match these needs consistently.

An example of a customer need might be a segment of the market requiring low-cost food and drink. A business may set up aiming to meet this need.

Increase sales and profits

By targeting specific customer groups, businesses can increase their sales and profits. Segmenting products means that businesses are likely to create products and services that have a higher chance of selling. For a small business, using segmentation to target a smaller group of customers could give them a higher chance of business survival.

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