What process involves dividing a market into distinct groups based on different needs and characteristics?

The process of dividing a market into distinct groups based on different needs and characteristics is referred to as market segmentation. This concept is fundamental in marketing as it allows businesses to identify and understand specific groups of consumers who may respond differently to marketing strategies. By segmenting the market, companies can tailor their products, services, and marketing efforts to match the unique preferences and behaviors of each group, leading to more effective targeting and improved customer satisfaction.

Market segmentation takes into account various factors such as demographics, psychographics, geographic locations, and behavioral traits. By addressing the specific needs of these segments, companies can optimize their marketing strategies and resources, thus enhancing their competitiveness in the market.

Understanding this process is crucial because it provides the groundwork for other marketing concepts such as target marketing and market positioning, which build upon the insights gained from segmentation.