Market segmentation — common mistakes

In case study questions, don't just state that a business should segment its market. Justify why it is a suitable strategy for that specific business, linking it to the company's objectives, products, or the competitive environment described in the text.

When answering a question, always select the most appropriate segmentation base(s) for the product in the scenario. For example, psychographic segmentation is highly relevant for holidays and fashion, while demographic segmentation is key for products like life insurance or toys.

Analysis marks are awarded for weighing up the pros and cons of a targeting strategy. For example, while niche marketing can build strong loyalty and face less competition, it is also riskier as the business is heavily dependent on that single segment.

To demonstrate strong application, you can draw a simple, labelled positioning map in your answer to illustrate the competitive landscape for a business in a case study. For example, plotting car brands on axes of 'Price' (High/Low) and 'Performance' (Sporty/Family).

The highest-level answers always integrate the 4Ps with segmentation. Don't just list the 4Ps. Explain how and why each element of the mix would be adapted for a specific, identified market segment from the case study.

Use a perceptual map sketch in evaluate questions — two axes (e.g. price vs quality) with brands plotted.

No, this is a common misconception. Segmentation is the analytical process of identifying and profiling different groups of buyers in a market. Targeting is the subsequent strategic decision of evaluating the various segments and selecting one or more of them to enter. In short, segmentation is the 'analysis' and targeting is the 'choice'.

Yes, and it is highly recommended for more precise targeting. This is known as multi-variable segmentation. For example, a luxury car brand might target a segment based on high income (demographic), a desire for status and performance (psychographic), and living in affluent urban areas (geographic). Combining bases creates a much richer and more detailed picture of the target customer.

While most businesses benefit significantly from segmentation, it is not a universal necessity. A business selling a truly undifferentiated commodity, like basic industrial salt or wheat, might adopt a mass marketing (undifferentiated) approach, as consumer needs are very similar. However, even in these cases, some basic segmentation usually occurs (e.g., industrial vs. consumer packaging). For the vast majority of consumer and business-to-business markets, segmentation is a critical tool for success.