Market segmentation is the process of dividing a broad target market into smaller, more defined groups of consumers. This helps businesses understand the specific needs and preferences of different segments, allowing them to tailor their products and marketing strategies effectively. For example, a company selling sports shoes might segment its market by age, gender, or activity level to better meet the demands of each group. By identifying distinct segments, companies can create targeted campaigns that resonate with their audience. This approach not only improves customer satisfaction but also enhances brand loyalty. Ultimately, effective market segmentation leads to increased sales and a stronger competitive edge in the marketplace.