Market segmentation

Market segmentation means dividing a market into groups of customers with similar characteristics, so a business can target them more effectively.
Markets can be segmented by location, demographics (such as age, gender or family size), income and lifestyle (interests, hobbies and values).

Benefits and drawbacks

Benefits: products can meet specific needs, marketing is more effective and less money is wasted, sales can rise, and niche opportunities can be found.
Drawbacks: each segment is smaller, research costs money, and other customers may be missed.

A market map positions brands on two features, such as price (high to low) and quality (high to low). It shows where competitors are and can reveal gaps in the market.

A mass market is large and general, such as bottled water. A niche market is small and specialised, such as a gluten-free bakery.
Niche markets often have less competition and allow higher prices, but sales are smaller and they are vulnerable to changes in demand.

Market segmentation: Dividing a market into groups of customers with similar characteristics.
Demographics: Characteristics of a population, such as age and gender.
Lifestyle segmentation: Grouping customers by their interests, hobbies and values.
Market map: A diagram that positions brands on two features, such as price and quality.
Niche market: A small, specialised part of a market.
Mass market: A large market with many customers.
Gap in the market: A customer need that no business is meeting.