Definition
Market segmentation is a way of aggregating prospective buyers into groups or segments, based on demographics, geography, behavior, or psychographic factors, in order to better understand and market to them. [1]
Having segmented a market, the task is then to determine which segments are profitable to serve. The business can adopt one of three market segmentation strategies: [1]
- undifferentiated marketing, in which the business attempts to go after the whole market with a product and marketing strategy intended to have mass appeal.
- differentiated marketing, in which the business operates in several segments of the market with offerings and market strategies tailored to each segment.
- concentrated marketing, in which the business focuses on only one or a few segments with the intention of capturing a large share of these segments.
Aggregation is a concept of market segmentation that assumes that most consumers are alike. Retailers adhering to the concept focus on common dimensions of the market rather than uniqueness, and the strategy is to focus on the broadest possible number of buyers by an appeal to universal product themes. Reliance is on mass distribution, mass advertising, and a universal theme of low price.
References
- Investopedia, Market Segmentation: Definition, Example, Types, Benefits (investopedia.com)
- American Marketing Association, AMA Dictionary.