A-Level Business/Year 12 · 3.1.3 Marketing management/Target markets and segmentation
Topic page · AS Paper 1 · A-level Paper 1

Target markets and segmentation

A business cannot please everyone, so it chooses who it is for and shapes the marketing mix around them. This page shows how segmentation works and how to judge a choice in the exam.

If a business wants more sales, why would it deliberately aim at fewer customers?

Spec pointAQA 3.1.3
YearYear 12 (AS and A-level)
PapersAS Paper 1 · A-level Paper 1
ModelNone (segmentation bases and the marketing mix)
Typical marks2 to 15
Where this sits on your specification
AQA AS Business 7137
3.1.3
Marketing management · Year 12
AQA A-level Business 7138
3.1.3
Marketing management · Paper 1
Outgoing A-level 7132 (exams June 2027)
Mostly in 7132 section 3.3
Mostly in 7132 section 3.3 (Decision making to improve marketing performance). Segmentation, targeting and the marketing mix are taught there. The four named bases and the 'influences on choosing a target market' wording are less explicit, so treat those as partly new.
Short answer

A target market is the group of customers a business chooses to serve. Segmentation splits a market into groups by demographic, geographic, psychographic or behavioural traits. Firms then pick a niche or mass approach and adapt product, price, promotion and place to suit the chosen group.

Year 12 or Year 13?

Year 12 (7137/7138): This is AS content in 3.1.3 Marketing management, so it can appear on AS Paper 1 in 2027. It also sits in A-level Paper 1 in 2028. Learn all four bases of segmentation by name. You will be asked to Define, Explain and Analyse them, and to Assess or Evaluate a targeting choice.

Year 13 (7132, June 2027): You sit the outgoing specification, where this material sits in section 3.3 on marketing. Use this page as revision for segmentation, niche v mass markets and the marketing mix. The labels 'psychographic' and 'behavioural' are useful but you will not be tested on those exact terms. Check your own specification before you rely on them.

Section IWhat the specification asks and the core conceptA target market is a chosen group. Segmentation is how a business finds and describes it.

A market is where buyers and sellers meet. A target market is the specific group of customers a business decides to serve. Market segmentation means splitting a market into smaller groups of customers who share needs or traits.

The purpose is simple. Customers differ, so one offer rarely suits all of them. Segmentation lets a business match its offer to a group, so it can charge a fair price, spend less on wasted advertising and build loyalty.

The four bases of segmentation

BaseSplits customers byExample
DemographicAge, gender, income, family size, occupationA student railcard for 16 to 25 year olds
GeographicWhere they live or workA café chain opening only in town centres
PsychographicLifestyle, values, attitudes, personalityEco-conscious shoppers who prefer ethical brands
BehaviouralHow they buy or use: frequency, loyalty, occasion, time of dayA loyalty app for frequent buyers; evening meal deals

Most businesses combine bases. 'Parents in cities who care about sustainability' mixes demographic, geographic and psychographic traits.

Influences on choosing and entering a target market

  • Size and growth of the segment, because a small, shrinking group may not cover costs.
  • Competition, because a crowded segment makes it harder to win share.
  • The firm's resources and strengths, such as brand, skills and finance.
  • Profitability, meaning how much customers will pay compared with the cost of reaching them.
  • Fit with the business objectives and brand image.
  • Barriers to entry, such as high set-up costs or strong rival loyalty.
  • Market research evidence about what the segment really wants.

Niche versus mass markets

A niche market is a small, specialised segment. A mass market is a large market with many customers who have broadly similar needs.

AdvantagesDisadvantages
NicheLess competition; loyal customers; premium prices possible; clear brand identityLimited sales volume; risky if the segment shrinks; large rivals may enter
MassHigh sales volume; economies of scale (lower unit costs as output rises); wide brand reachIntense competition; lower margins; one offer may fit nobody well; high promotion costs

Adapting the marketing mix

The marketing mix is product, price, promotion and place. Once a target market is chosen, each element is set to fit it. A premium niche might use high prices, specialist retailers and word of mouth. A mass-market brand might use low prices, supermarket shelves and television or social media adverts.

Illustrative figures: a market has 400,000 buyers. Segment A is 10% of buyers (40,000) and would pay £30. Segment B is 60% (240,000) and would pay £8. Segment A gives potential revenue of £1.2 million. Segment B gives £1.92 million. Segment B is larger, but it needs a bigger promotion budget and faces tougher rivals, so the better choice depends on costs and the objective.

No Annex 8 sophisticated concept is central here. Price elasticity of demand (PED, how sensitive demand is to a price change) helps when you judge pricing for each segment.

Section IIHow it works in a real businessGreggs shows behavioural, geographic and channel decisions in one UK company.

Greggs is a UK food-to-go chain. In 2025 it chose to grow sales in the evening, a behavioural choice about when customers buy. Evening sales were 9.4% of company-managed shop sales, up from 9.0% in 2024.[1]

To serve that group, it changed the mix. The menu gained hot food and sharing items, opening hours stretched later, and delivery grew. That is the mix adapted to a segment, so product, place and promotion move together.

Location is also a segmentation choice. Greggs opened many shops in places with no other Greggs nearby. This tests whether new geographic segments exist before it commits.[1]

In an exam answer, link the segment to the evidence in the case study. Name the base, say what the customers want, then say which mix element changes and why.

Section IIIEvaluation: what the choice depends onNiche or mass, and which segment, depend on size, rivals, costs and time.

Evaluation means weighing the arguments and reaching a judgement. For targeting, the main points to weigh are these.

  • Segment size and growth. A niche is only attractive if it is big enough to be profitable.
  • Competition. A niche with no rivals may be empty for a reason, so check that demand is real.
  • Resources. A small firm may lack the money for mass advertising, so a niche suits it better.
  • Objectives. A goal of rapid growth favours a wider market. A goal of high margins favours a niche.
  • Time. Tastes change, so a segment that pays well today may shrink in five years.
  • Risk of over-adapting. Tailoring the mix to many segments raises costs and can blur the brand.

A strong judgement says which factor matters most in this case and why. For example, 'Because the firm has limited cash, a niche is more suitable in the short run, but it should review this once sales grow.'

Section IVMistakes that lose marksVague segments, listing without application, and one-sided niche or mass answers.

Common errors

  • Saying 'it targets everyone'. A target market is a choice, so name the group and the base.
  • Confusing segmentation with market research. Research finds the evidence. Segmentation uses it to split the market.
  • Listing the four Ps without linking them to the chosen group. That earns AO1 but little AO2 or AO3.
  • Treating niche as always better for small firms. It depends on demand, rivals and objectives.
  • Giving a conclusion that repeats the question. Say which segment or approach, and what the decision depends on.
Key termsKeywords to use preciselyThe terms examiners expect you to define and use correctly on this topic.
Market segmentationSplitting a market into groups of customers who share similar needs or characteristics.
Target marketThe specific group of customers a business chooses to aim its marketing at.
Demographic segmentationDividing customers by traits such as age, gender, income or family size.
Psychographic segmentationDividing customers by lifestyle, values, attitudes and personality.
Behavioural segmentationDividing customers by how they buy or use a product, such as frequency, loyalty or occasion.
Niche marketA small, specialised segment of a larger market with particular needs.
Mass marketA large market of many customers with broadly similar needs, served with a standard offer.
Marketing mixThe combination of product, price, promotion and place used to meet the needs of a target market.
How it is examinedSix question archetypesDefine, Explain, Analyse, Assess, Evaluate and quantitative questions, with the AOs each one rewards.

Every AQA Business question uses one of five command words, each with a fixed mark tariff, and quantitative questions sit inside the 9 and 15-mark formats. The A-level papers have no 2 or 4-mark questions. Open each format to see how this topic appears in it. All questions here are original Curriculum Circle practice questions, not board questions.

ARCHETYPE 01Define2 marks · AS onlyAO1

On this topicYou are asked for the meaning of a term such as market segmentation, niche market or target market.

What earns the marksTwo AO1 marks for a clear definition with a key feature or short example.

CC practice questionDefine 'market segmentation'. (2 marks)

ARCHETYPE 02Explain4 marks · AS onlyAO1 · AO2

On this topicYou explain one way a business segments its market or one reason it matters, using a short context.

What earns the marksAO1 for the idea and AO2 for applying it to the business named.

CC practice questionA bakery chain offers cheaper meal deals after 5pm. Explain one reason why this is an example of behavioural segmentation. (4 marks)

ARCHETYPE 03Analyse6 marksAO1–AO3

On this topicYou build a chain of reasoning about why a firm adapts one element of the mix for a segment.

What earns the marksAO1 knowledge, AO2 application and AO3 analysis through linked 'because' and 'so' steps.

CC practice questionA trainer brand targets 16 to 24 year olds on social media. Analyse how this target market might affect its promotion. (6 marks)

ARCHETYPE 04Assess9 marksAO1–AO4

On this topicYou weigh up the advantages and disadvantages of a niche or mass approach for a named firm, then judge.

What earns the marksAO1 to AO3 for the arguments, and AO4 for a justified judgement.

CC practice questionA small firm sells handmade vegan chocolate to health-conscious adults. Assess the advantages and disadvantages of staying in a niche market. (9 marks)

ARCHETYPE 05Evaluate15 marksAO1–AO4

On this topicYou compare two targeting options, such as entering a new segment or deepening an existing one, and recommend one.

What earns the marksAO1 to AO4, with the highest credit for a recommendation justified against the context and what it depends on.

CC practice questionA café chain can target office workers with fast service or families with a larger menu. Evaluate which target market it should choose. (15 marks)

ARCHETYPE 06Quantitative9 or 15 marksAO1–AO4

On this topicCase study data on segment size, spend or market share is used to compare segments before you judge.

What earns the marksAO1 and AO3 for correct calculations and AO4 for using them to judge the better segment.

CC practice questionIllustrative figures: Segment A has 25,000 buyers spending £40 each. Segment B has 90,000 buyers spending £9 each. Analyse which segment gives more revenue, then assess which the firm should target if promotion to B costs £300,000 and to A costs £80,000. (9 marks)

Assessment objectivesWhat the examiner is testingAO1 to AO4, their weightings, and what each one means on this topic.
 WeightWhat it isWhat it means on target markets and segmentation
AO132.5% AS · 24.44% A-levelKnowledge and understanding of terms, concepts, theories, methods and modelsKnow the four bases, the niche and mass trade-offs, and the four parts of the marketing mix, and define them accurately.
AO227.5% AS · 24.44% A-levelApplication to the business context in the case studyName the customers in the case, say which base fits, and show which mix element changes for them.
AO320% AS · 26.66% A-levelAnalysis of issues and their impact on individuals and organisationsLink the choice of segment to costs, revenue, loyalty or competition through 'because' and 'so' chains.
AO420% AS · 24.44% A-levelEvaluation of quantitative and qualitative information to make judgementsWeigh segment size, rivals, resources and objectives, then judge which choice suits this business and what would change your view.

Weightings are approximate and taken from the AQA AS 7137 and A-level 7138 specification [0].

Exam applicationA model chain of reasoningAnalysis, then evaluation, on an original practice question.

A UK sportswear brand sells mainly to young adults in cities. It is considering entering the over-50s fitness market. Evaluate whether it should enter this new target market. (15 marks)

Analysis

The over-50s segment may be large and growing, so it could raise sales beyond the brand's current customers. This is a demographic segment, so the mix would need to change: comfort-focused products, clearer sizing, and advertising in places older customers use. Because the brand's image is youthful, the new promotion may cost more to build, so margins may fall in the early years.

Evaluation

The decision depends on how much the brand's image limits it and how large the segment really is. If market research shows strong demand and the firm has spare cash, entering is sensible, because it spreads risk away from one age group. If research is weak, a smaller range sold online would be safer. On balance, a staged entry is the better recommendation, because it tests demand before the firm commits large sums.

Why this works

The chain moves from the segment, to the mix, to cost and risk, and ends with a justified recommendation.
Real worldWhere you have already seen thisCurrent, dated examples you can use for AO2, each with its source.
01

Greggs, the UK food-to-go chain, reported that evening sales were 9.4% of company-managed shop sales in 2025, up from 9.0% in 2024. It also ranked fourth in the market for dinner visits, according to market data firm Circana. This shows a behavioural segment (time of day) being built through opening hours and menu.[1]

02

In 2025, 53% of Greggs new shop openings, excluding relocations, were in areas with no other Greggs within a mile. This is a geographic targeting choice, because it tests demand in places the brand did not serve before.[1]

03

Greggs said its app was scanned in 26.7% of company-managed shop transactions in 2025. In the same results it launched a Bake-at-Home range with Tesco, selling to customers through a supermarket as well as its own shops. Both moves adapt place and promotion to different buying habits.[2][3]

Going deeperThe five branchesFive planned pieces, each built to train one assessment objective.

Everything above is the topic page. The pieces below take it further. Each one trains a particular assessment objective rather than covering the topic again, and they are added over the year.

Trains AO2
Branch 01 · The Case
The Case: how Greggs widened its target market beyond breakfast
A close look at Greggs taking apart behavioural, geographic and channel decisions using the four bases and the marketing mix.
Planned · Jan 2027
Trains AO1 · AO3
Branch 02 · The Model
The Model: segmenting a market step by step
Choosing a base, sizing each segment, comparing revenue and cost, then selecting a target and setting the mix.
Planned · Feb 2027
Trains AO1 · AO3
Branch 03 · The Misconception
The Misconception: 'a niche is always safer than a mass market'
Why this belief loses AO4 marks, and how to correct it with size, rivals and objectives.
Planned · Mar 2027
Trains AO4
Branch 04 · The Examiner's Line
The Examiner's Line: turning a list of segments into a judgement
The sentence that links the chosen segment to the firm's objective and states what the choice depends on.
Planned · Apr 2027
Trains AO1–AO4
Branch 05 · The Question
The Question: a 9-mark niche or mass answer at two grades
One practice question answered at a lower and a higher grade, with the differences explained.
Planned · May 2027
ReferencesSourcesEvery figure and fact on this page, with links.
  1. [0]AQA (2025). AS and A-level Business specification 7137/7138, version 1.1 (November 2025)
  2. [1]Greggs plc (2026). Greggs plc Preliminary Results for the 52 weeks ended 27 December 2025
  3. [2]Greggs plc (2026). Greggs Preliminary Results 2026-03-03 (RNS)
  4. [3]Investegate (2026). Greggs plc Preliminary Results (RNS announcement)

Figures and facts were checked against these sources on 2 November 2026. Worked numbers labelled "Illustrative figures" are invented for teaching.

Nearby

Related topics

Where the depth lives

For more practice on segmentation questions, the CC Business revision platform and the Inner Academy's recorded lessons go further.

See the Business platformThe Inner Academy