Syllabus: Pearson Edexcel GCSE Business
Module: Enterprise and Entrepreneurship
Lesson: 1.2.3 Market Segmentation

Introduction

Market segmentation, part of Theme 1 of the Pearson Edexcel GCSE Business syllabus (1.2.3), helps students understand how and why businesses split the market into distinct groups to better meet customer needs. This unit sits within “Spotting a Business Opportunity”, which focuses on how entrepreneurs identify gaps in the market.

The concept isn’t just theoretical – it’s a practical lens through which students can examine how real businesses tailor products, pricing, and messaging. With rising expectations for curriculum relevance, career readiness, and real-world application, this lesson bridges those gaps effectively for learners across KS4.

Key Concepts

Aligned with the Pearson Edexcel GCSE Business specification, students need to understand:

• What market segmentation is: dividing a market into groups of buyers with similar needs or characteristics.

• Why businesses segment the market: to target customers more effectively and meet specific needs.

• Methods of segmentation:

  • Demographic (e.g. age, gender, income)

  • Geographic (location-based)

  • Behavioural (e.g. purchasing habits, brand loyalty)

  • Psychographic (e.g. lifestyle, interests)

• How segmentation helps businesses:

  • Improves customer targeting and satisfaction

  • Supports more efficient marketing strategies

  • Identifies gaps in the market or underserved audiences

• Limitations of segmentation:

  • Risk of stereotyping

  • Overlooking market overlap

  • Increased marketing costs due to tailored approaches

Real-World Relevance

Businesses across the UK economy actively use segmentation:

• Supermarkets segment by income and lifestyle. Think Tesco Finest vs. Everyday Value.

• Streaming services like Spotify or Netflix use behavioural segmentation – your listening or watching history determines recommendations and ads.

• Retail brands such as ASOS use psychographic segmentation, curating product ranges for trend-conscious Gen Z customers.

Local case idea for class: A student-led tuck shop trialling product lines based on year-group preferences – Year 10 loves spicy snacks, while Year 11 prefers meal deals. Real feedback drives product range decisions.

How It’s Assessed

Students will encounter market segmentation in both multiple-choice and longer structured response questions. Common formats include:

• Explain: e.g. “Explain one benefit to a business of using market segmentation.”

• Analyse: e.g. “Analyse how using demographic segmentation could help a new clothing business.”

• Evaluate: often in 9-mark questions, assessing the extent to which segmentation will help a business succeed.

Command words to prioritise teaching: explain, analyse, evaluate, and discuss. Diagrams or examples often help strengthen mid-to-long response answers.

Enterprise Skills Integration

This topic supports core enterprise capabilities:

• Problem-solving: identifying unmet needs in the market through segmentation.

• Decision-making: choosing the most effective segment to target based on market research.

• Communication: articulating how different groups require tailored marketing messages.

• Creative thinking: imagining product adaptations for different customer types.

Using tools like MarketScope AI, teachers can simulate customer persona profiles from real data to sharpen decision-making and pitch development in enterprise projects.

Careers Links

Understanding segmentation is essential for:

• Marketing roles (advertising, product development, market research)

• Entrepreneurship and business development

• Customer insight and UX design (e.g. tech firms tailoring services)

This aligns well with Gatsby Benchmark 4 (Linking curriculum learning to careers) and Benchmark 5 (Encounters with employers). Consider inviting a local marketing professional to discuss how their company uses customer segmentation.

Teaching Notes

Top tips:

• Use product-based scenarios students can relate to: e.g. trainers, mobile phones, snacks.

• Roleplay tasks work well – get students to pitch a product to a specific segment.

• Use past paper extracts to model excellent (and not-so-excellent) answers.

Common pitfalls:

• Confusing segmentation with target market.

• Listing segment types without applying them to a context.

• Overgeneralising customer groups.

Extension activities:

• Conduct local market research (within school or community).

• Use Pitch Deck Analyser to refine business ideas by audience segment.

• Compare segmentation strategies between large multinationals and local SMEs.