Market Segmentation
Why Split the Market?
No business can please everyone. A supermarket that tries to be the cheapest, the most luxurious, the most ethical and the most convenient at the same time ends up being none of them. That is why businesses use market segmentation — they split the whole market into smaller groups of customers who share similar characteristics, pick one or more groups to focus on, and design the product, price, promotion and place to match that group exactly. The OCR specification names five ways to segment: age, gender, income, location and lifestyle.
Targeting is the next step. Once a business has split the market into segments, it chooses which segment or segments to serve. Aldi targets price-conscious shoppers; Waitrose targets high-income households who want quality and service. Both are supermarkets; both are successful; they simply picked different segments.
The five segmentation bases in the OCR specification are age, gender, income, location and lifestyle. Each lets a business design a marketing mix aimed at one specific group rather than wasting money trying to please everyone.
The Five Bases in Detail
Age — splitting the market into age bands. LEGO targets children aged 4–11, Netflix teen comedies target 13–19, and Saga holidays and insurance target the over-50s. Each age group has different spending power, different interests and different media habits. An advert that works on TikTok for a 17-year-old rarely works for a 70-year-old.
Gender — splitting by male, female or non-binary customers. Fragrance brands like Lynx design products around young male shoppers, while Dove’s ‘Real Beauty’ campaigns target women. Sports brands often launch separate lines too — Gymshark’s womenswear range now matches its menswear in size.
Income — splitting by how much customers earn. Aldi and Lidl target shoppers who want the lowest price. Waitrose and Fortnum & Mason target higher-income households who will pay more for quality and service. Income segmentation shapes price, product quality and where the shops open — Aldi moves into areas with lower average incomes, Waitrose into wealthier commuter towns.
Location — splitting by where customers live. A surf shop in Newquay stocks very different products to a ski shop in Aviemore, even though both sell sports gear. Location affects weather, culture, language and which rivals are nearby. Greggs runs different offers in the north and south of England to reflect regional tastes.
Lifestyle — splitting by how customers live: active or sedentary, health-conscious or indulgent, outdoorsy, vegan, luxury-focused. Gymshark targets young fitness enthusiasts who train regularly and post workout content online; The North Face targets the outdoorsy segment who hike, climb and ski. Lifestyle is the newest of the five bases and overlaps with age and income, but it is powerful because it captures how people spend their time and money, not just their demographics.
Segmentation in Action — Aldi vs Waitrose
Aldi and Waitrose sell the same basic goods — bread, milk, vegetables — but their segmentation is completely different. Aldi targets income (low to mid), location (everywhere, including smaller towns) and lifestyle (value-seeking, practical). Its stores are no-frills, its own-brand products sit on pallets, and its adverts use the slogan ‘Like brands, only cheaper’.
Waitrose targets income (high), location (commuter towns and wealthier city suburbs) and lifestyle (quality-focused, ethically minded, time-rich). Its stores feel premium, its adverts focus on British farming and sourcing, and prices are noticeably higher. Neither supermarket is trying to win the other’s customers — both have designed their whole marketing mix around a different segment and are happy to stay there.
Segmentation in Action — Gymshark and Saga
Gymshark is built around age (16–25), gender (male and female, with separate ranges), and lifestyle (active, social-media-fluent, gym-focused). The brand rose from a Bromsgrove garage in 2012 to more than a billion pounds in valuation by 2020 — not by trying to sell to every shopper, but by owning one tight segment.
Saga sits at the opposite end of the age axis. It targets the over-50s with insurance, holidays, magazines and cruises. Its products are designed around older customers — large print, easy booking, holidays that travel slower — and its adverts run in newspapers and TV channels watched by older audiences, not on TikTok. Again, the segmentation drives every part of the marketing mix.
Combining Bases
Most larger UK businesses use more than one segmentation base at the same time. Boots divides the health and beauty market by gender (men’s Boots range vs No7 for women), by age (Boots Baby vs Boots 50+ vitamins), by income (premium brands vs own-label) and by location (city-centre flagship stores, retail park ‘beauty’ stores, local pharmacies). Combining bases gives a much sharper picture of the customer than using one base alone — a 55-year-old woman on a high income shopping in central London has different needs to a 20-year-old man on a low income in a market town, even though both are Boots customers. This kind of detail feeds straight into the marketing mix every brand builds.
Segmenting lets a business focus its marketing on people who are likely to buy, which raises the return on every pound spent. Bigger firms usually combine two or more bases (e.g. Boots uses age, gender, income AND location) for a sharper target.
Benefits: marketing spend is focused on people likely to buy, so the return on each pound is higher. Products are designed around real customer needs, raising sales and loyalty. Smaller firms can also compete with giants by owning one segment rather than fighting across the whole market.
Drawbacks: segmentation costs money — the business needs market research to identify segments and may need different products, packaging and adverts for each. There is also a risk of stereotyping customers and missing buyers who do not fit the expected profile. Brands have to watch for segment drift too — when Topshop stopped appealing to its core 16–25 segment, its parent company collapsed into administration in 2020.