Market segmentation is the process of breaking a market into segments and marketing a product in different ways to those different segments. It can also include coming up with different products to sell to the different segments. Market segmentation is usually seen as a good thing because it allows firms to tailor their products and/or marketing approaches so as to do the best job of appealing to each segment.
However, market segmentation can have drawbacks. The two most important examples are
- It can be costly to identify all the different segments and then to spend the money to create different products and/or marketing schemes for each.
- It can make it harder for the company to reach out to a broad range of consumers. If the firm only makes products that appeal to small niches, it will be hard for it to become a widely-known and well-liked company across the whole population of consumers. It might remain a small company, appealing only to small groups of consumers.