What is market segmentation?

Market segmentation refers to the process of dividing a target market into smaller, more defined categories based on shared characteristics. This practice allows businesses to better tailor their marketing strategies to meet the specific needs and preferences of different segments of the market. By understanding the distinct demographics, behaviors, or psychographics within a larger market, companies can create targeted marketing campaigns that are more likely to resonate with their audience.

For instance, a car manufacturer might segment the market by age, income level, or lifestyle choices. This segmentation enables the company to design models and marketing messages that appeal directly to families, young professionals, or luxury car buyers. Overall, effective market segmentation helps improve customer satisfaction and can enhance overall business performance by focusing resources on the most promising market segments.