Market segmentation divides a large market into smaller groups based on shared characteristics like age, income, location, behavior, or lifestyle. The goal is to tailor products and marketing messages to each group's specific needs.
There are four main types: demographic (age, gender, income), geographic (location), psychographic (lifestyle, values), and behavioral (purchase habits). For example, Nike creates different product lines for runners, basketball players, and casual wearers.
Effective segmentation reduces marketing waste, improves customer satisfaction, and gives businesses a competitive edge by serving specific needs better than one-size-fits-all approaches.