EDEXCEL GCSE BUSINESS · PAPER 1
Exam Practice: Market Segmentation
Market segmentation · Spotting a business opportunity · Lesson 3 of 5 · 13 marks · 20 minutes
Name Date
Answer all questions. Use the context of the business in the question where one is given.
Question 1 DEFINE [1 mark]
Define the term 'market segmentation'.
Question 2 STATE [1 mark]
State one way a market can be segmented.
Question 3 OUTLINE [2 marks]
Outline one way a holiday company could segment its market.
Question 4 EXPLAIN [3 marks]
Explain one benefit to a business of segmenting its market.
Question 5 ANALYSE [6 marks]
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SOURCE Leon has opened a small gym in a town with a large university and a growing number of retired residents. He wants to attract more members, and is thinking about offering separate memberships for different groups of customers. |
Analyse the benefits to Leon of segmenting his market.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
Dividing a market into smaller groups of customers who share similar characteristics and needs.
▸ Dividing a market into groups of customers with similar characteristics / needs 1 mark
Question 2 [1 mark]
By age.
▸ Any one of: location; demographics; lifestyle; income; age 1 mark
Question 3 [2 marks]
By income (1), offering cheap package holidays for customers on lower incomes and luxury holidays for high earners (1).
▸ A method identified: location / demographics / lifestyle / income / age 1 mark
▸ Developed in the context of a holiday company 1 mark
Question 4 [3 marks]
It can target its marketing more effectively (1). By knowing which segment it is selling to, the business can advertise only where those customers will see it (1). This means it wastes less money on promotion to people who will not buy, so its marketing costs are lower for each sale made (1).
▸ A benefit identified, e.g. better meets needs / targeted marketing / identifies gaps / higher sales 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark
Question 5 [6 marks]
Segmenting by age would let Leon meet the different needs of his two main groups. Students may want cheap memberships and late opening, while retired residents may prefer daytime classes and a quieter gym. By designing a membership for each, both groups are more likely to join, which increases his total number of members and revenue. Segmenting would also help Leon target his promotion. He could advertise student deals on social media and at the university, and advertise daytime classes in local newspapers and community centres. This means he spends his limited marketing budget where each segment will actually see it, rather than wasting money on adverts that reach the wrong people.
▸ AO2 (Application, 3 marks): uses the context - university students, retired residents, gym memberships Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning showing how segmentation benefits Leon Level 1-3