Syllabus: Cambridge - IGCSE Business Studies
Module: 3.1 Marketing Competition and the Customer
Lesson: 3.1.4 How and Why Market Segmentation is Undertaken

Introduction

This article supports delivery of Cambridge IGCSE Business Studies, Unit 3.1.4: How and Why Market Segmentation is Undertaken. It is part of the broader Marketing: Competition and the Customer strand, where learners explore how businesses understand and target customers. The concept of market segmentation is essential for enabling learners to grasp real-world commercial strategy, positioning it at the core of both academic understanding and workplace relevance. The topic aligns with Cambridge IGCSE’s emphasis on applying business theory to practical contexts, ensuring students are equipped with commercially literate decision-making capabilities.

Key Concepts

Cambridge IGCSE specifies the following learning outcomes for this unit:

• Definition of Market Segmentation: Understanding segmentation as the process of dividing a market into groups of consumers with similar needs or characteristics.

• Reasons for Market Segmentation: Why businesses segment markets, such as to better meet customer needs, improve competitiveness, or increase sales.

• Methods of Segmentation:

  • Demographic – age, gender, income, education

  • Geographic – region, country, urban vs rural

  • Psychographic – lifestyles, opinions, attitudes

  • Behavioural – usage rates, brand loyalty, purchasing patterns

• Benefits of Segmentation:

  • Better targeting of products and promotions

  • Competitive advantage through customer-specific messaging

  • More efficient use of marketing resources

• Risks and Limitations:

  • Over-segmentation leading to high costs

  • Misinterpretation of consumer behaviour

These principles provide the groundwork for analysing real businesses and evaluating their marketing strategies.

Real-World Relevance

Market segmentation is at the heart of how businesses operate in competitive environments. Consider:

• Spotify segments users into free and premium subscribers, tailoring content and advertising to each.

• Nike targets different segments through sub-brands (e.g. Jordan for basketball, Nike Women for lifestyle).

• Tesco uses Clubcard data to segment customers based on buying habits, enabling hyper-targeted promotions.

These examples illustrate how segmentation is used not only to attract consumers, but also to retain them through personalisation and relevance—key themes students will encounter in workplace settings.

How It’s Assessed

In Cambridge IGCSE Business Studies, assessment will typically include:

• Short Answer Questions (SAQs): Define or describe segmentation methods.

• Data Response Questions: Students analyse a business scenario and apply segmentation concepts (e.g. “Identify and explain two ways the business has segmented its market”).

• Extended Writing (6–8 marks): Evaluate the effectiveness of a business’s segmentation strategy.

Command words such as explain, analyse, and evaluate require students to show depth, apply context, and justify opinions using evidence. For example, a question might ask students to “evaluate whether a new business should segment its market,” expecting a balanced view and supported reasoning.

Enterprise Skills Integration

Market segmentation provides fertile ground for developing commercial awareness, decision-making, and problem-solving skills:

• Commercial Awareness: Students explore how customer needs vary and how businesses adapt, connecting them to real business dynamics.

• Decision-Making: Learners must assess which segmentation strategy is most effective and justify choices under constraints.

• Data Analysis: Students can interpret basic market data or customer profiles to suggest segmentation strategies.

• Customer Focus: The unit aligns with the “Customer Focus” skill strand in the Skills Hub Futures programme, helping students learn how to understand stakeholder needs.

These are all competencies highlighted in the Enterprise Skills Thematic Framework, critical for workplace readiness.

Careers Links

This topic provides strong links to Gatsby Benchmarks 4, 5, and 6:

• Benchmark 4 – Linking Curriculum Learning to Careers: Segmentation connects directly to careers in marketing, product development, customer service, and business analytics.

• Benchmark 5 – Encounters with Employers: Real company case studies (e.g. John Lewis or Netflix) illustrate segmentation in action.

• Benchmark 6 – Experiences of Workplaces: Tools like Skills Hub Futures simulate commercial decision-making, offering students realistic workplace exposure.

Relevant Careers:

• Marketing Executive

• Product Manager

• Data Analyst

• Market Researcher

• Brand Strategist

Employers consistently report the need for students who can understand and respond to diverse customer needs—this unit supports that requirement.

Teaching Notes

Top Teaching Tips:

• Use real data to build segmentation maps in class (e.g. for mobile phone users).

• Pair segmentation with persona creation to help students visualise customer types.

• Run mock marketing campaigns where students must select a target segment and justify their approach.

Common Pitfalls:

• Confusing market segmentation with targeting or positioning. Use diagrams or the STP (Segmentation, Targeting, Positioning) model for clarity.

• Overemphasising demographics—remind students that psychographics and behaviour often drive more insightful segmentation.

Extension Activities:

• Use Skills Hub Business or Futures simulations to give students hands-on experience crafting marketing strategies.

• Invite local business owners to talk about how they segment their customer base (links to Benchmark 5).

Assessment Practice:

• Set exam-style questions using Cambridge past papers.

• Include group analysis tasks using anonymised customer data to reinforce applied understanding.