What is "market segmentation"?

Market segmentation refers to the process of dividing a target market into defined categories, allowing businesses to identify and target specific groups of consumers who have similar needs, preferences, or characteristics. By segmenting the market, companies can tailor their marketing strategies, products, and services to better meet the unique desires of each segment, ultimately leading to increased customer satisfaction and loyalty.

This approach enables businesses to focus their resources more efficiently, enhancing the effectiveness of their marketing campaigns. By understanding the distinct attributes of each segment—such as demographics, psychographics, or geographic location—companies can create more personalized messages, optimize their product offerings, and improve overall market performance.

In contrast, other choices refer to different marketing concepts that do not specifically address the categorization of the target market. For example, pricing methods based on demand relates to pricing strategies rather than market division, while analyzing sales data focuses on performance metrics rather than market categorization. Assessing market share pertains to evaluating a company's sales relative to the overall market instead of breaking down the market into segments.