What is market segmentation?

Market segmentation is the process of dividing a broader market into smaller, more defined categories or segments of consumers who have distinct needs, preferences, or characteristics. This process allows businesses to tailor their marketing strategies and product offerings to meet the specific desires and requirements of different groups. By understanding these differences, companies can create targeted advertising campaigns, develop products that better serve particular segments, and improve customer satisfaction.

For example, a company selling athletic shoes might segment its market into runners, basketball players, and casual wearers. Each group has unique preferences that could influence how the company markets its products to them. This targeted approach can lead to more effective marketing, higher sales, and improved customer loyalty.

The other options do not accurately capture the essence of market segmentation. Increasing product prices based on consumer demand relates more to pricing strategies, while creating a marketing plan for a single product focuses on a specific item rather than broader market analysis. Analyzing market competition for pricing strategies deals with understanding how competitors influence pricing, rather than dividing consumers into segments. These contexts highlight why segmentation is fundamental for targeted marketing efforts.