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Definition: Market Segmentation
Market segmentation is a process of dividing the entire market population into multiple meaningful segments based on marketing variables like demographics (age, gender etc), geographic, psychographics (lifestyle, behaviour) etc. Segmentation in marketing is identifying a set of homogenous segments having similar needs, properties & demands which can be used by a company to sell their product/service more effectively.

Once an entire population is divided into market segments, companies can target them more accurately and design their positioning accordingly. This entire process is also known as STP (Segmentation, Targeting and Positioning).

Importance of Market Segmentation:
Market segmentation is an important aspect for any business as it helps them slice the market into smaller groups or segments, which can then be identified based on their needs and can be catered to. Market segmentation reduces the population in the market and gives a much more addressable audience rather than giving random groups of people. Having similar groups would enable companies to be more focused in terms of their product offerings, product differentiation strategies, marketing strategies, pricing strategies etc. This would help companies mitigate unnecessary risks, reduce costs, target customers better, have better retention and generate more profits. Hence, segmenting the entire population of market is essentially critical for any business to prosper.

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