What is Market Segmentation?

Market segmentation is a marketing strategy that separates individuals in a market into discrete groups based on certain criteria.

How Does Market Segmentation Work?

Market segmentation is predicated on the notion that a given product or service may be effectively marketable to only certain individuals. Companies that use market segmentation identify groups, or segments, of a total market population (for example, a country) and tailor their marketing campaigns to appeal to individual market segments.

Similarities among a segment's members distinguish it from the rest of the market. Segments may be broken out by interests, language and age group, among others.

Why Does Market Segmentation Matter?

Market segmentation tries to quantify the ways in which different groups assign value to a product or service. In this sense, it allows companies to reach the greatest number of consumers through greater awareness of how people respond to advertising.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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