What is the process of dividing a market into groups of similar customers called?

Market segmentation is the process of dividing a broader market into smaller, more defined categories of consumers who share similar characteristics or needs. This strategy allows businesses to tailor their products, marketing strategies, and services to meet the specific preferences of each group, which can enhance customer satisfaction and improve sales effectiveness.

By identifying distinct segments within the market, companies can more efficiently allocate their resources and focus on the segments that are most likely to respond positively to their offerings. This targeted approach helps businesses achieve a competitive advantage by ensuring that their marketing efforts are relevant and resonate with the intended audience.

The other options pertain to different concepts; for example, market analysis involves researching and understanding the market landscape itself, while market share relates to the portion of the market controlled by a particular company or product. Target marketing is closely linked to segmentation but refers more specifically to the act of selecting one or more segments to focus marketing efforts on rather than the segmentation process itself.