What is the process of dividing a target market into smaller, more defined categories called?

The process of dividing a target market into smaller, more defined categories is called market segmentation. This strategic approach allows businesses to identify and understand distinct groups within the larger market, which may have unique needs, preferences, and behaviors. By segmenting the market, companies can tailor their marketing strategies, products, and services to more effectively meet the specific demands of each segment.

Market segmentation enhances the efficiency and effectiveness of marketing efforts, as it enables organizations to focus resources on the most promising segments rather than adopting a one-size-fits-all approach. This, in turn, can lead to increased customer satisfaction, loyalty, and ultimately higher sales and profitability.

In contrast, market analysis refers to the broader process of researching and understanding the overall market conditions, while market targeting involves selecting specific segments for focused marketing efforts after segmentation has occurred. Market diversity is less commonly used in this context and doesn't specifically describe the practice of dividing a market. Thus, market segmentation is the precise term that accurately captures the intended process described in the question.