Market segmentation involves dividing the overall market into subgroups of customers with similar needs and characteristics. Segmenting the market allows companies to target specific groups and better plan their products, pricing, distribution, and marketing. For example, Mercedes targets high-income customers interested in luxury and style, while Maruti Suzuki focuses on the common, lower-income consumer. Key types of segmentation include geographic, demographic, psychological, and behavioral segmentation based on attributes such as location, age, income, lifestyle preferences, and purchase history. Market segmentation provides benefits like understanding customer needs, improving targeting, building customer relationships, and increasing profits.