The purpose of market segmentation is to determine how best to reach target markets with a product or service. It involves analyzing customers’ needs and wants, as well as their demographics and psychographics. Market segmentation can be done by determining customer value, classifying customers based on demographic factors, and grouping them into clusters based on similarities in behavior.
Market segmentation is often used in conjunction with other marketing strategies such as product differentiation and target marketing. Marketers use market segmentation when creating new products by identifying groups of target customers who have similar needs and preferences for a product or service. This allows marketers to tailor their offerings to specific customer segments rather than creating one-size-fits-all products that may not meet the needs of some consumers. By dividing up customers according to common characteristics such as age, gender and location, companies can develop strategies that focus on specific groups of people without having to appeal to everyone at once.
The process of market segmentation involves developing a profile for each segment based on the following criteria: size, growth rate, profitability and potential profitability (what it would cost to acquire this customer). From there, marketers can start developing strategies for each segment based on these criteria. For example, if a company has five segments it would want its strategy for each segment to be unique but still make sense for all five segments at once.