N4 Entrepreneurship & Business Management 2.2.2 Market segmentation


Market segmentation is the process of identifying a smaller market that exists within the larger market. These smaller markets are called market segments. The people in a particular market segment are supposed to be similar in terms of one or more characteristics. These characteristics refer to the different ways you describe your target market, but are formalised. The different ways of segmenting your market are:


• Demographic segmentation: The market is segmented according to age, sex, income, education, occupation and culture. (Most of what we mentioned earlier on).


• Product related segmentation: A market can also be segmented according to the consumer’s usage of the product. The characteristics of the consumer’s relationship to the product are therefore the way the market is segmented. If you want to sell a homemade brew, then your market segment is beer drinkers, as they are the people who will buy your home-brew.


• Geographic segmentation: A market can also be segmented as to where people live. The climate, transport methods and types of housing are examples of how people might behave similarly because of their geographic location.


• Psychographic segmentation:


This form of segmentation is done according to lifestyles, personality characteristics, social class, etc. The best example is that if you plan to sell tents and other camping gear, then you will probably consider people who enjoy nature and other out-door recreation as your market segment.


Activity 4


Complete the worksheet that deals with your target market in our business plan workbook. You may not be able to complete all the different criteria of defining a target market. If you cannot, give a reason why it is not possible.


Demographic Geographic


Market segmentation


Psychographic Product Related


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