GCSE / Level 2 Revision Notes

Marketing - Understanding the customer

Segmentation is all about splitting a market up into relevant sections to make marketing more effective.

In order for a business to segment its market, it needs to understand and analyse its target customers.

A problem that faces any start-up or small business is that customers are not all the same!

Think about how you behave as a customer. The things that you want from your mobile phone or night out are likely to be different from those wanted by someone of a different age, with other interests and so on.
So how does a business address these differences?  In short, the challenge for a business is to:

• Identify groups of customers who have similar needs and wants
• Find a way of offering (positioning) a product which is attractive to those customer groups

Markets consist of customers with similar needs. For example, consider the wide variety of markets that exist to meet the need to:

• Eat (e.g. restaurants, fast food)
• Drink (e.g. coffee bars, pubs & clubs)
• Travel (for business and leisure, near or far)
• Socialise (as couples, with family, with friends)
• Be educated (as a child, adult, for work or other reasons)

As you can imagine, such markets (if they were not further divided into smaller parts) would be very broad and difficult for a new business to target.

The great news for any new business is that customers in any broad market are not the same. For example, within the market to provide meals, customers differ in the:

• Benefits they want (food quality, ambience, dietary health)
• Amount they are able to or willing to pay (budget, expensive)
• Quantities they buy (bulk buy or one-off purchase)
• Time and place that they buy (fast-food, up-market restaurant)