LO1 Explain what market segmentation is and when to use it.
Market segmentation involves aggregating prospective buyers into groups that (a) have common needs and (b) will respond similarly to a marketing action. Organizations go to the expense of segmenting their markets when it increases their sales, profits, and ability to serve customers better.

LO2 Identify the five steps involved in segmenting and targeting markets.
Step 1 is to group potential buyers into segments. Buyers within a segment should have similar characteristics to each other and respond similarly to marketing actions like a new product or a lower price. Step 2 involves putting related products to be sold into meaningful groups. In step 3, organizations develop a market-product grid with estimated sizes of markets in each of the market-product cells of the resulting table. Step 4 involves selecting the target market segments on which the organization should focus. Step 5 involves taking marketing mix actions—often in the form of a marketing program—to reach the target market segments.

LO3 Recognize the bases used to segment consumer and organizational markets.
Bases used to segment consumer markets include geographic, demographic, psychographic, and behavioral ones. Organizational markets use the same bases except for psychographic ones.

LO4 Develop a market-product grid to identify a target market and recommend resulting actions.
Organizations use five key criteria to segment markets, whose groupings appear in the rows of the market-product grid. Groups of related products appear in the columns. After estimating the size of market in each cell in the grid, they select the target market segments on which to focus. They then identify marketing mix actions—often in a marketing program—to reach the target market most efficiently.