Define market segmentation and discuss why market segmentation is important to the well-being of most companies.

Market segmentation is the practice of dividing a market into distinct groups of buyers who have different needs, wants, and resources so businesses can cater to each segment in different ways. The purpose of market segmentation is to target specific customers, identify needs and preferences of various customer segments and generate appropriate word-of-mouth marketing strategies for each segment. By doing this, companies can effectively build appeal to smaller, but highly focused, groups that share similar interests, tastes and values. Market segmentation is essential to the well-being of most companies because it helps them better understand the needs and wants of their target customers. Companies can improve their products, services and communications accordingly, connecting more effectively with their target customers. This helps to build relationships, trust, and loyalty between the company and their customers. Knowing how to target their core customer base can help companies optimize their marketing spend, create better customer relationships, increase ROI, and sustain competitive advantage. As a result, it can help companies increase sales, become more profitable, and stay competitive in the marketplace.