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Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in its needs and attitudes, each is likely to respond similarly to a given marketing strategy. That is, each is likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overallgoals are to identify groups of similar customers and potential customers to prioritize the groups to address, to understand their behavior, and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues can be thus improved.
Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.
By using statistical techniques, data set can be partitioned into subsets whose elements share a common behavior.