What is the process of dividing a larger market into smaller segments based on shared characteristics called?

The process of dividing a larger market into smaller segments based on shared characteristics is referred to as segmentation. This process allows marketers to identify specific groups within the market that share similar needs, preferences, or behaviors, enabling more targeted and effective marketing strategies.

Segmentation is essential because it acknowledges that not all consumers are the same and that a one-size-fits-all approach may not be the most effective in addressing different customer needs. By segmenting the market, businesses can tailor their products, messages, and offerings to appeal to specific groups, thereby improving customer satisfaction and increasing the likelihood of sales.

Other choices, while related to marketing, do not accurately define the process of dividing a market. Product differentiation deals with distinguishing a product from competitors, market research is the process of gathering and analyzing information about the market, and target marketing involves selecting specific segments to focus marketing efforts on after segmentation has taken place. Thus, segmentation stands out as the foundational step in understanding and effectively reaching diverse consumer groups.