Market Segmentation


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)


Loading the player...

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.

  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. Fundamental Analysis

    The Green Marketing Machine

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

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  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. Stock Analysis

    What Makes the 'Share a Coke' Campaign So Successful?

    Understand how Coca-Cola implemented the successful "Share a Coke" campaign. Learn about the top three reasons why the campaign was successful.
  7. Insurance

    Using LinkedIn to Find Life Insurance Leads

    Learn how LinkedIn can help you generate leads as a life insurance agent, and understand the steps to turn your profile into a lead-generating machine.
  8. Professionals

    How to Break the Ice with New Clients

    Conducting an effective, initial client–advisor interview is an essential part of any advisor’s job. Here are a few tips on how to get started.
  9. Professionals

    Why Advisors Must Create a Mobile Strategy NOW

    Mobile devices will replace laptops and desktops. Financial advisors must deal with this revolution to ensure their marketing strategies are up to speed.
  10. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  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. 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 >>
  4. 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 >>
  5. How does a long tail become profitable?

    A long tail becomes profitable because the costs to produce, market and distribute a product or service in a niche are low, ... Read Full Answer >>
  6. How do companies with a large product portfolio use BCG Analysis?

    BCG analysis is used to evaluate an organization's product portfolio in sales planning and marketing. It is specifically ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!