Question

Why is it important for a company to segment its markets into smaller groups rather than just going for the whole market?

Answer 1

Segmenting the market into smaller groups will enable a firm to cater to the specific needs of each of those segments. As each segment may have different requirements, the firm can modify its product, price etc to suit those requirements. Such an approach will help the firm to nearly own those segments.

In contrast, if the firm is going for the whole market, when there can be divergence in the requirement of different groups of customers, the firm will have to go for common requirements of the whole market and would fail to meet the specific but unique requirements of the different groups. The firm would lose sales to other firms which go for segmented marketing.