Market segmentation is one of two general approaches to marketing; the other is mass-marketing. In the mass-marketing approach, businesses look at the total market as though all of its parts were the same and market accordingly. In the market-segmentation approach, the total market is viewed as being made up of several smaller segments, each different from the other. This approach enables businesses to identify one or more appealing segments to which they can profitably target their products and marketing efforts.

The market-segmentation process involves multiple steps (Figure 1). The first is to define the market in terms of the product's end users and their needs. The second is to divide the market into groups on the basis of their characteristics and buying behaviors.

Possible bases for dividing a total market are different for consumer markets than for industrial markets. The most common elements used to separate consumer...