Market segmentation is the process of grouping a customers into smaller subgroups -- a market segment. The customers a company wants to reach are rarely homogeneous, rather the "total market" is often made up of submarkets (called 'segments'). The people in these smaller segments are similar to each other and are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feeling and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way.
This entry includes content from the following Wikipedia article: Market segment