Market segmentation is the process of dividing a large market into clearly distinguishable, homogenous submarkets (segments). Market segmentation can be done by product and customer group applying various criteria. Customer groups, for instance, may be divided according to sociographic (location, age, sex, marital status, household size, education, occupation, income, etc.), psychographic (interests, values, norms) or behavioral factors. The aim of market segmentation is to identify the most attractive segments with the highest profit potentials and to develop and implement strategies that are tailored to the specific needs, wants, or demand characteristics of these segments.
Also read our blogpost on strategic customer segmentation.