OxfordAQA A-Level Business: Segmentation, targeting and positioning (9625/9725)

This guide covers section 3.1.2.3, Segmentation, targeting and positioning, in the OxfordAQA International AS and A-level Business specification (9625 for current cohorts, 9725 as the successor). The two specifications word it differently. The 9625 text lists the process and value of segmentation, targeting and positioning; five segmentation methods (demographic, geographic, income, behavioural, psychographic); influences on choosing a target market and positioning, where targeting includes niche and mass marketing; and international markets. The 9725 text (International AS exams from May/June 2027, A-level from May/June 2028) lists four methods, has no international markets point in this section, and adds value of targeting, premium and budget positioning, and reasons for, and challenges of, changing positioning. This guide covers both and marks the parts found in one only.

Use it with the Marketing topic study guide, the topic revision notes and the topic practice set. For this subtopic, see the revision notes and the practice questions. Other links: the course hub, the checklist and the free diagnostics. All money figures below are in dollars.

What the specification lists

Content point in 3.1.2.3	Where it is covered
The process (and value) of segmentation, targeting and positioning	Sections 1 and 3
Segmentation methods: demographic, geographic, psychographic, behavioural; income as a fifth method (9625 only)	Section 2
Influences on choosing a target market and positioning	Section 4
Value of targeting (9725 wording)	Section 5
Niche and mass marketing (9625: targeting includes them; 9725: advantages and disadvantages)	Section 6
Meaning of positioning, including premium and budget (9725 only)	Section 7
Reasons for, and challenges of, changing positioning (9725 only)	Section 8
International markets: benefits and potential difficulties (9625 only)	Section 9

1. The process: segment, target, position

1. Segmentation: divide a market into groups of customers who share characteristics and so want similar things.
2. Targeting: choose which of those groups to aim at.
3. Positioning: decide how you want the chosen customers to see your product compared with rival products, then build the marketing around that.

Each step depends on the one before; the marketing mix then carries the positioning out. Strong answers show each decision following from the last, using facts in the case.

Worked example: Zennova Cycles

Zennova Cycles, an invented firm, makes commuter bicycles. Among 400,000 adult cyclists in a large city it finds 60,000 who ride to work every day and want a bike that survives rain and theft. It decides this group is distinct enough to serve.

Segment: daily commuters (behavioural, by how they use bikes) living in the city (geographic). Target: the 60,000 commuters, which is 15% of the city’s cyclists. Position: the dependable, weatherproof commuter bike. Zennova prices it above basic bikes, fits a lock-ready frame and sells through its website and two city showrooms.

2. Segmentation methods

9625 names five and 9725 names four (no separate income). Know what each means, give variables, and be ready to say which suits a given case.

Method	Divides customers by	Typical variables
Demographic	Measurable features of people	Age, gender, income, occupation, family size, education
Geographic	Where they live	Country, region, urban or rural, climate, population density
Income	How much money they have to spend	Household income, income bands, disposable income, spending power
Psychographic	How they think and live	Lifestyle, values, attitudes, interests, personality, aspirations
Behavioural	What they do as buyers	How often they buy, loyalty, occasion, benefits sought, readiness to buy

Points to keep straight:

• Under 9625 income is a method in its own right, so name it as income (for example, a luxury watch aimed at the highest income band). Under 9725 treat it as a demographic variable.
• Demographic data is easiest to collect. Psychographic data is harder to measure but can explain why two people of the same age buy differently.
• Businesses often combine methods. Zennova used geographic and behavioural together.
• Choose the method that matters for the product: ice cream and climate (geographic), a pension and age (demographic), a gym and visit frequency (behavioural), a sustainable fashion label and values (psychographic).

3. The value of market segmentation

Segmentation lets a business stop treating customers as one lump. Its value:

• Better fit. Products, prices and messages can match what each group actually wants.
• Less waste. Promotion can go where the right people are, rather than reaching everyone.
• Spotting gaps. A group whose needs nobody meets is an opportunity.
• Clearer decisions. Once the groups are known, targeting and positioning have something to work from.

The limits: research costs money, and segments can be too small to be profitable or too costly to serve separately.

4. Influences on choosing a target market and positioning

Neither specification lists the influences. The ones below are our own judgement, not specification wording, so tie each to the case. Useful ones:

• Size and growth of the segment. A large, growing segment offers more sales, but a small one may be enough for a small firm.
• Likely profitability. What price will the segment pay, and what will it cost to serve and reach?
• Competition. Is the segment crowded? Where are rivals positioned already? A gap can be better than a crowded middle.
• The firm’s resources and strengths. Money, skills, brand and production capacity limit what is realistic.
• Business objectives. A firm chasing fast growth may favour mass marketing. One seeking a strong reputation may favour a narrower, premium group.
• Market research results. Evidence about what the segment wants and will pay.
• The product itself. Its quality, features and cost shape where it can credibly sit.
• Customer perceptions. How they see the brand now limits where it can go.
• External changes. Incomes, technology, laws and fashions can open or close segments.

Worked example: choosing between targets

Zennova can aim at its 60,000 commuters (niche) or at a broad range of adult cyclists. The figures below are invented for the example.

	Niche: commuters	Mass: all adult cyclists
Customers in group	60,000	400,000
Expected share bought per year	8%	2%
Units sold	4,800	8,000
Price per bike	450	300
Variable cost per bike	270	210
Promotion cost	180,000	520,000

Niche: 60,000 x 8% = 4,800 bikes. Revenue 4,800 x 450 = 2,160,000. Contribution per bike 450 - 270 = 180, so total contribution 864,000. After promotion cost, 864,000 - 180,000 = 684,000.

Mass: 400,000 x 2% = 8,000 bikes. Revenue 8,000 x 300 = 2,400,000. Contribution per bike 300 - 210 = 90, so 720,000. After promotion, 720,000 - 520,000 = 200,000.

Mass marketing earns more revenue (2,400,000 against 2,160,000) but the niche leaves far more after promotion (684,000 against 200,000). A 2% share is a forecast, not a fact, and the niche is only one city. A sound answer says the niche looks better on these figures and names what could change that.

5. The value of targeting (listed separately in 9725)

Targeting is the decision that turns segmentation into action. Its value:

• Marketing money is concentrated on customers most likely to buy.
• The product and message can be specific, which tends to raise the chance of a sale.
• Loyalty can grow when a group feels the product was made for it.
• Results can be measured against a defined group.

The cost of targeting is what you give up: customers outside the target may be lost, and a wrong choice wastes the plan.

6. Niche and mass marketing

Niche marketing serves a small, specialised segment. Mass marketing sells one broadly similar offer to a large part of the market.

	Advantages	Disadvantages
Niche	Less direct competition from large firms; customers may pay more for a tailored product; loyalty can be high; lower promotion cost as the group is easy to reach	Few customers, so growth is limited; dependence on one segment; a large rival may enter if the niche proves profitable
Mass	Large sales potential; scope for economies of scale and lower unit costs; wide brand awareness	Heavy competition; expensive promotion; the product may suit nobody perfectly; pressure on margins

Neither is right in itself. A niche suits a small firm with a clear point of difference; mass marketing suits a firm able to produce at scale and fund wide promotion. Whether a segment is “niche” depends on the whole market: 60,000 is niche against 400,000 but not against 5,000.

7. Positioning, premium and budget (9725 wording)

Positioning is the place a product holds in customers’ minds compared with competing products. It comes from price, quality, features, image, packaging and where it is sold.

A simple positioning map uses two axes, here price and perceived quality:

Quality
 high |  PREMIUM
      |   (Zennova's aim)         
      |
      |         MIDDLE (often crowded)
      |
  low |                  BUDGET
      +--------------------------------
        high price               low price

Premium positioning: a high price signals high quality, exclusivity or status. It needs real or perceived superiority, careful branding and selective distribution. Margins per unit are high, volumes lower, and quality slips damage the position.

Budget positioning: a low price and good enough quality. It needs tight cost control and usually high volume. Margins per unit are thin, and rivals can copy a low price easily. Budget does not mean poor quality; it means customers see low-priced value.

Positioning has to be consistent: a premium price in a discount store sends mixed signals.

8. Changing positioning: reasons and challenges (9725 wording)

Reasons a business might reposition:

• Tastes or incomes have changed.
• Sales have fallen or the brand seems old.
• A competitor has taken the position, or the segment is shrinking.
• A new, growing segment has appeared.
• Bad publicity has damaged the brand.

Challenges:

• Cost. New advertising, packaging, product changes and staff training.
• Alienating current customers, who may feel the brand has left them behind.
• Credibility. Customers may not believe a new image that does not match what they know.
• A muddled image if old and new messages overlap, so the firm may win neither group.

Worked example: Aldergate Hotels

Aldergate Hotels, an invented chain, runs a 120-room budget business hotel. It averages 58% room occupancy at 64 per night. It spends 1,150,000 refurbishing and relaunching the hotel as a premium boutique hotel. In year one after relaunch, occupancy is 66% at 79 per night.

Rooms available per year: 120 x 365 = 43,800 room-nights. Revenue before: 43,800 x 58% x 64 = 1,625,856. Revenue after: 43,800 x 66% x 79 = 2,283,732. Increase: 657,876, about 40%.

At that rate the extra revenue would cover the 1,150,000 spend in about 21 months, ignoring the extra running costs of a premium hotel, so true payback is longer. Former budget guests may leave and business travellers may not accept the new image. A judgement should weigh the revenue gain against those risks.

9. International markets (9625 wording)

Targeting can also mean choosing to sell in another country. Treat each country as a possible target market and segment it in the usual ways.

Benefits: a much larger customer base; sales growth when the home market is saturated; spreading risk so a fall in one country matters less; possible economies of scale from higher output; a chance to enter a niche that is larger abroad than at home.

Potential difficulties: differences in language, culture and tastes, so the product or message may need changing; unfamiliar customer behaviour and income levels; exchange rate movements that alter prices and profit; transport and distribution costs; unfamiliar rules and competitors; and the cost and risk of market research in an unknown market.

Judgement: the case for going abroad is stronger when the home market is small or crowded and the firm has resources to adapt its product.

Common errors

• Mixing up the three steps, such as calling a choice of target “segmentation”.
• Listing methods without applying one to the case business.
• Treating niche as meaning “cheap” or mass as meaning “bad”.
• Calling budget positioning “low quality” automatically.
• Listing only benefits of international markets and no difficulties.
• Judging repositioning only by cost and ignoring the risk to existing customers.

Frequently asked questions

What is positioning in marketing? Positioning is the place a product holds in customers’ minds compared with competing products. A positioning map often uses two axes, such as price and perceived quality, and the positioning must be consistent with the rest of the marketing mix.

What is the difference between premium and budget positioning? Premium positioning uses a high price to signal high quality, exclusivity or status and needs real or perceived superiority. Budget positioning offers a low price with good enough quality and needs tight cost control and usually high volume.

Why might a business reposition a product? A business may reposition because tastes or incomes have changed, sales have fallen, the brand seems dated or a competitor has taken the position. Challenges include the cost of new promotion and packaging and the risk of losing current customers.

What are the three steps of segmentation, targeting and positioning? Segmentation divides a market into groups of customers who share characteristics, targeting chooses which group or groups to serve, and positioning decides how the product should be seen by that target compared with rivals. Each step depends on the one before.

When does niche marketing suit a business? A niche suits a small firm with a clear point of difference, while mass marketing suits a firm able to produce at scale and fund wide promotion. Neither is right in itself.

Official syllabus

OxfordAQA International AS and A-level Business specification, section 3.1.2.3 (9625 and the 9725 successor; International AS from May/June 2027 and A-level from May/June 2028 for 9725).