What does market segmentation refer to?

Market segmentation refers to dividing a target market into smaller categories based on shared characteristics, behaviors, or needs. This process allows businesses to tailor their marketing strategies and product offerings to specific groups of consumers, making their efforts more relevant and effective. By understanding the unique preferences of each segment, businesses can create targeted marketing campaigns, optimize product features, and ultimately improve customer satisfaction and loyalty.

In this context, focusing on smaller groups within the overall market enables businesses to identify opportunities for growth and enhance competitiveness. For example, a company might segment its market by demographics, such as age or income level, or by psychographics, such as lifestyle or values. This precise targeting can lead to more successful product launches and increased sales, as the offerings are adapted to meet the distinct desires of different customer segments.

The other options do not capture the essence of market segmentation. Expanding a business's reach, identifying the needs of the entire market, or lowering prices to gain market share involve broader strategies that don't specifically focus on the division of the market into smaller, actionable parts.