Segment a market using customer characteristics
Group customers by age, income, location, gender or lifestyle and assess the value of targeting a segment.
Section 3 · Marketing
Exam scope and assessment notes
Cambridge IGCSE Business Studies 0450, 2026 syllabus, Version 2. Use the 2026 A*–G route; this qualification changes to 0264 for first assessment in 2027. Candidates are not assessed on constructing income statements or statements of financial position, nor on price-elasticity or exchange-rate calculations. Simple cash-flow forecast construction is assessed. Written practice is self-checked, not an official Cambridge grade; timed-paper evidence and human subject-teacher review remain outstanding.
Before you begin
- No previous marketing study is assumed. Identify the customer group, the business objective and the evidence in each situation before choosing a response.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which is a syllabus basis for market segmentation?
What you will learn
- Identify segmentation bases
- Explain advantages and disadvantages
- Use a target segment without stereotyping
Group customers by relevant characteristics
The syllabus bases are age, income, location, gender and lifestyle. Segmentation divides a market into groups whose members share a relevant characteristic or need.
A segment should help a business understand an offer or communication decision. Broad characteristics do not mean that every person in the group has identical preferences.
Target thoughtfully
Segmentation can help a business tailor products and promotion, use resources more precisely and identify unmet needs. It can also increase research and production costs, exclude customers or rely on assumptions that do not fit individual buyers.
Use evidence about the proposed segment and avoid treating personal identity as a reliable substitute for research. A recommendation should state why the characteristic matters to the product.
Pause and explain
What should a business check before tailoring an offer to an age group?
Worked example
A delivery service groups customers by distance from its central depot. Which segmentation basis is used, and how might it help?
Show the worked solution
- Distance describes where customers are located.
- Location is one syllabus basis.
- Delivery cost and timing may vary with distance.
Answer The service uses location segmentation. It can compare delivery times and costs by area and tailor routes or service terms where the evidence supports it.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A travel company wants to design short trips for customers with limited free time. Name two possible segmentation bases and explain what evidence to collect.
Give me a hint
Choose characteristics related to availability and destination decisions.
Compare my reasoning
- Age or lifestyle may help describe customer groups, but should not replace evidence.
- Location may affect travel access.
- Ask potential customers about available time and trip preferences.
The company could explore lifestyle and location segments, then collect evidence about available days, preferred destinations and travel constraints. Age alone would not prove how much free time a person has.
Look for these in your work
- Two relevant bases named
- Evidence tied to need
- Stereotype avoided
A business targets high-income customers with a premium service. Give one advantage and one risk of this segmentation choice.
Give me a hint
Connect income to affordability and market reach.
Compare my reasoning
- The service may be designed for customers willing to pay more.
- A targeted offer can concentrate marketing resources.
- The segment may be smaller, and income alone does not guarantee interest.
The business can focus its offer and promotion on customers who may afford a premium price. The target group may be limited, and not all high-income customers want the service, so research should confirm demand.
Look for these in your work
- Advantage linked
- Market reach considered
- Group variation acknowledged
A clothing retailer plans to advertise a product only to women based on an assumption about colour preferences. Explain how it could improve this decision.
Give me a hint
Test the preference with customers rather than relying on a broad label.
Compare my reasoning
- Gender is a segmentation basis but does not prove a preference.
- Survey or test the product with relevant customers.
- Use actual buying evidence to define the audience.
The retailer should test interest with a range of potential customers and review sales or survey evidence before restricting advertising. Gender can describe a segment, but it does not establish every customer's preferences.
Look for these in your work
- Basis recognized
- Assumption challenged
- Evidence-based adjustment proposed
Common mistakes
- Assuming age or gender predicts every customer's preferences
- Using a segment that cannot be reached or served
- Confusing segmentation with raising prices for a group
What can you explain now?
Which is a syllabus basis for market segmentation?
Compare with the explanation
Lifestyle
Lifestyle is listed as a segmentation basis.
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Make it stick
Name the five syllabus bases for segmenting a market and one reason to validate a segment with research.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.