Market research and segmentation
Market research is the process a business uses to gather and analyse information about its customers, competitors and the wider market, and market segmentation is dividing that market into groups of customers with similar characteristics so marketing can target them more precisely.
Before you start
Make sure you're comfortable with these topics first:
Method
- Identify whether a question needs primary or secondary research: primary answers a specific new question but costs more and takes longer; secondary is cheaper and faster but may be out of date or not specific enough to the business.
- Learn each primary method (questionnaire, survey, interview, focus group, observation, test marketing) and match it to a scenario, e.g. a focus group is used to test reactions to a new product concept in depth.
- Distinguish quantitative data (numbers, easy to compare, e.g. '62% of respondents') from qualitative data (opinions and words, richer detail, e.g. 'customers said the packaging felt cheap').
- Learn what makes data reliable: a large, random and representative sample reduces bias; a small or non-random sample, such as only asking people outside one shop, produces unreliable results.
- Learn the segmentation variables (age, gender, income or socio-economic group, location, lifestyle) and be able to suggest which fits a given product.
- For 'explain' questions on why a business segments a market, give the reason plus the linked business benefit, e.g. segmenting lets a business target marketing precisely, which increases the effectiveness of spending and raises sales.
- For 'evaluate' questions on research methods, weigh cost, time, reliability and how specific the data is to the business's actual question, then reach a supported judgement referring to the business in the case.
Worked example
PurePress Ltd is a new business planning to launch a range of reusable water bottles aimed at students. It is deciding between two research methods: (1) buying a secondary market report on the reusable drinks bottle industry, or (2) running its own primary questionnaire outside three university campuses. Recommend which method PurePress should use, giving a reason for your choice.
- Identify what each method offers: the secondary report gives existing industry-wide data quickly and cheaply, but was not written specifically for PurePress's product or target customer.
- The primary questionnaire gives data specific to PurePress's actual target customers and its actual product idea, so the answers are directly usable.
- Weigh reliability: outside three campuses gives a reasonably large and relevant sample of the target market, though it should still be checked for bias, such as sampling at different times of day.
- Weigh cost and time against the value of the data: PurePress is a new business making a risky launch decision, so first-hand evidence about whether students would buy this specific product is more valuable than general industry trends.
- Conclusion: PurePress should prioritise the primary questionnaire, because it produces data specific to its target customer and product, directly reducing the risk of the launch decision, even though the secondary report remains useful as cheap background context.
Practice questions
Try each question, then tap to reveal the answer.
Q1What is the difference between primary and secondary market research?Show answer
Answer: Primary research collects new, first-hand data specifically for the business's own question; secondary research uses data that already exists, collected by someone else for another purpose.
Q2Give one example of a primary research method.Show answer
Answer: A questionnaire, survey, interview, focus group, observation, or test marketing (any one).
Q3Is '45% of customers said they would buy the product' quantitative or qualitative data?Show answer
Answer: Quantitative, because it is expressed as a number that can be measured and compared.
Q4State one reason a sample of 20 people, all surveyed outside the same shop, might produce unreliable data.Show answer
Answer: The sample is small and not randomly chosen from the wider target market, so it may not represent customers as a whole (sampling bias).
Q5Name three variables a business could use to segment a market.Show answer
Answer: Any three of: age, gender, income or socio-economic group, location, lifestyle.
Q6Why might a focus group be more useful than a questionnaire for testing a new product concept?Show answer
Answer: A focus group allows in-depth discussion and follow-up questions, revealing the reasons behind opinions, which a questionnaire's fixed answers cannot capture.
Q7A business segments its market by income. Give one product example that suits income-based segmentation.Show answer
Answer: A luxury car brand aimed at high-income customers, or a budget supermarket own-brand range aimed at lower-income customers.
Q8What is meant by a 'representative sample'?Show answer
Answer: A sample whose characteristics, such as age, gender and location, reflect those of the wider target market, so the results can be generalised with confidence.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain TWO reasons why a business might use market segmentation when planning its marketing.
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Meadow Bakes is a small independent bakery in a market town. It currently sells the same range of bread and cakes to all customers at one set of prices. The owner is considering commissioning primary research (a questionnaire distributed to local customers) before deciding whether to segment its customers into 'health-conscious' and 'traditional' groups, each with a different product range. Recommend whether Meadow Bakes should carry out this primary research and introduce segmentation. Justify your answer, referring to Meadow Bakes in your response.
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See real GCSE Business past-paper questions, with official mark schemes →
Free printable worksheet
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