What is market segmentation?
Market segmentation is the process of dividing a specific market into sub-groups based on a shared set of characteristics. The aim of this segmentation is to identify groups with the highest potential profit or growth.
Where have you heard about market segmentation?
Market segmentation is an important tool in both business and investing to determine which sectors are best to invest in.
What you need to know about market segmentation...
Businesses use market segmentation to split their target market into groups. That way they can identify the most likely segments for growth and profit. They look at location, demographics such as gender, income levels and age, and previous buying behaviour. Digital companies use big data sets to make their targeting even more effective.
From an investment point of view, understanding market segmentation and how companies use it can help you identify stock that might have the potential to rise in price.