CAIE IGCSE Business Studies 3.1.4 market segmentation
Practise segmentation questions by defining segments, naming segmentation bases and justifying whether targeting helps competition.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define segmentation as dividing the market by consumer characteristics for targeting.
- Identify bases such as age, income, location, gender, lifestyle or social group.
- Justify whether selling to different segments is the best response to competition.
3.1.4—Market segmentation question 1
[Maximum number: 6]
Alana opened a restaurant in the city centre 5 years ago. The restaurant provides plant-based meals using a range of vegetables. Alana uses primary market research to help identify changes in consumer spending patterns. Market research can also be used to help segment a market. The restaurant has 16 employees. Each employee is paid the legal minimum wage. In 2023 the business made a profit of $ 80000. Alana wants to know how an increase in interest rates might affect her business.
Do you think income is the best way for a business to segment a market? Justify your answer.
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether income is the best way for a business to segment a market.
Points might include:
Income:
- Can target advertising at particular groups [k] so more cost-effective (use of budget) / reducing expenses [an]
- Can target groups with different products [k] which may lead to more sales/market share [an]
- Can price the product differently for each income groups [k] which could increase sales/revenue [an]
- Product could be associated as cheap/expensive [k] which reduces potential market [an]
- Not everyone will like the same things [k]
By region/location [k]
- Able to adapt products/advertising to consider cultural/social differences [an]
- Can modify language to suit the area [an]
- Helps provide appropriate products that would sell in specific locations / some products may be demand more in certain areas than others [an]
Gender [k]
- Allows business to change design to appeal to men/women [an]
- Could miss out on large potential market as feel the product is not designed for them [an]
- Expensive to make/stock products to target both genders [an]
This is a general question so there are no marks for application.
Some points may be relevant for more than one way, but only award point once.
Alternative methods of classification are:
- Demographic (age, socio-economic, gender, income, ethnic background, family size)
- Geographic (location/region)
- Psychographic (lifestyle, attitudes, personalities)
There can be a mix of classifications, but do not award overlapping points.
Age [k]
- As different age groups may have different product preferences [an]
- Can target advertising at particular age groups [an]
By use of product [k]
By lifestyle [k]
Other appropriate responses should also be credited.
Justification might include:
Income allows a business to price the product differently for different income groups [k] so customers will pay based on what they can afford [an]. It could use gender [k] which allows the business to change design to appeal to men or women [an]. Income is likely to be a better way as using gender could lead to missing out on half of the potential market [eval]. Whereas, by using income, the business can price its products based on ability to pay which could lead to a wider potential market overall [eval].
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