Market Segmentation is a marketing strategy which involves dividing a broad target market into subsets that have, or are perceived to have common needs, interest and priorities, and then designing and implementing strategies to target them.
Advantages
- Higher sales lead to higher profits if the segmentation is successful and products designed suits the need of the market
- Better understanding of consumer need
- Targets particular groups with particular products
- Prevents the product being targeted towards the wrong group of customers
Disadvantages
- If the group size is too small the business will not be able to exploit economies of scale
- A business constantly updates itself about the changing demand of the segments
- Fierce competition may take place once one segment becomes profitable as it will attract other businesses
Market Segmentation is explained in more detail in Rob Jones' Edexcel International GCSE Business Studies book
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