Market Segmentation & Targeting (Years 8–11) — Business Studies

Markets are segmented by age, income, lifestyle or location to choose target markets and niche or mass strategies.

Not all customers are the same, so businesses divide a market into groups with similar needs. This is called market segmentation.

Why this matters Trying to please everyone often pleases no one. By focusing on clear groups, a business can design products and messages that fit each group closely, using its budget more efficiently.

Ways to segment a market

Common bases for segmentation include:

Age: young children, teenagers, adults, older people.
Income: budget shoppers versus premium buyers.
Lifestyle and interests: sporty families, home cooks, students.
Location: town, region or country.
Gender, where relevant, such as modest-wear ranges.

Target markets

Once a market is segmented, a business selects a target market the group it will aim its product at. A revision app might target parents of Year 10 and 11 pupils. Choosing a target market shapes the product design, price and promotion so they suit those customers.

Niche and mass markets

A niche market is a small, specialised part of a larger market, such as ethically sourced children's books. Niche businesses face less competition and can charge more, but sales are limited and the segment may shrink. A mass market aims at a very large group with a broad product, such as everyday groceries. Mass markets give high sales volume but strong competition and lower prices.

A niche market is a small, specialised slice of the much larger mass market — fewer competitors and higher prices, but a smaller ceiling on sales.

Benefits and limits

Segmentation helps a business meet needs precisely, target promotion and reduce waste. However, over-segmenting can raise costs, and groups can be hard to define exactly. The aim is meaningful groups the business can actually reach and serve well.

Put these steps in order for segmenting and targeting a market (STP):

Identify the possible segments within the whole market
Research what each segment needs and how big it is
Choose the target market(s) to focus on
Design a marketing mix that suits the chosen target market

Common exam mistake: using "market segment" and "target market" as if they mean the same thing. A market segment is any one of the groups the whole market is divided into; the target market is the specific segment (or segments) a business chooses to actually aim its product at.

Exam technique: when asked to suggest a suitable segmentation base for a named product, pick the one that most directly explains the buying decision (age for a children's toy, income for a luxury item) rather than listing every possible base generically.