Market Segmentation

Loading the player...

DEFINITION of 'Market Segmentation'

A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another. Generally three criteria can be used to identify different market segments:

1) Homogeneity (common needs within segment)2) Distinction (unique from other groups)3) Reaction (similar response to market)

BREAKING DOWN 'Market Segmentation'

For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners will respond to very different advertisements.

RELATED TERMS
  1. Market

    A medium allowing buyers and sellers of a specific good or service ...
  2. Capitalism

    A system of economics based on the private ownership of capital ...
  3. Activities, Interests And Opinions ...

    A person's characteristics used by market researchers to construct ...
  4. Advertising-To-Sales Ratio

    A measurement of the effectiveness of an advertising campaign ...
  5. Market Segmentation Theory

    A modern theory pertaining to interest rates stipulating that ...
  6. Banner Advertising

    A rectangular graphic display that stretches across the top or ...
Related Articles
  1. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  2. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  3. Professionals

    Market Segmentation

    Market segmentation is a process marketers us to group similar consumers together. Why do they do this?
  4. Fundamental Analysis

    The Green Marketing Machine

    Don't let corporations greenwash their dirty laundry. Learn how to spot a phony.
  5. Professionals

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  6. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  7. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  8. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  9. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  10. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
RELATED FAQS
  1. What is the average annual growth rate of the utilities sector?

    Utilities companies are popular among investors for their stable cash flows and dividend yields. The utilities sector includes ... Read Full Answer >>
  2. What are some examples of businesses that use market segmentation?

    Numerous types of businesses use market segmentation to optimize their ability to sell to a wide variety of consumers. From ... Read Full Answer >>
  3. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  4. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  5. Is a financial advisor allowed to pay a referral fee?

    A financial advisor is allowed to pay a referral fee to a third party for soliciting clients. However, the Securities and ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center