Which term describes dividing customers into distinct groups based on shared characteristics?

Market segmentation is the process of dividing customers into distinct groups based on shared characteristics. This approach allows businesses to tailor their marketing efforts, products, and services to meet the specific needs of each segment, enhancing customer satisfaction and increasing the efficiency of marketing campaigns.

By grouping customers with similar preferences, behaviors, demographics, or needs, companies can identify unique selling propositions for each segment, leading to more effective communication and tailored offerings. For instance, a business might segment its customers based on their age, income level, or purchasing behavior, allowing them to create targeted marketing strategies that resonate with each specific group.

This concept is fundamental in developing effective marketing strategies, as it enables businesses to focus their resources on the most promising segments without trying to appeal to all potential customers universally.