Why might companies conduct market segmentation?

Companies conduct market segmentation primarily to focus on the most profitable customers. This process involves dividing a broad target market into subsets of consumers who have common needs and priorities. By understanding the different segments of their target market, businesses can tailor their products, services, and marketing strategies to meet the specific needs of those groups more effectively.

Focusing on the most profitable customers enables companies to allocate resources more efficiently, as they can direct marketing efforts towards segments that are likely to yield the highest returns. This targeted approach allows for enhanced customer satisfaction, loyalty, and ultimately, increased profitability. It also helps businesses identify new opportunities within specific market segments, thus driving growth and improving market position.

In contrast, other approaches such as universally marketing to all potential customers don't take individual needs into account, which may dilute the effectiveness of marketing efforts. Streamlining production processes and reducing advertising costs are beneficial strategies but are not the primary motivators for conducting market segmentation.