Market Segmentation

What It Is:

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

How It Works/Example:

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 It Matters:

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.