Market segmentation is the process of categorizing the market into several groups on the basis of various factors such as demographic, geographic, psychological, and behavioral factors. This is to ensure that the marketers can understand their target audience better so as to make the marketing more effective and get more satisfied customers. Thus, the marketers can gain a great advantage over the competitors. There are different ways by which market segments can be categorized. It can be done by categorizing the preferences of the consumer. Based on this, market can be categorized as homogeneous preferences, diffused preferences and clustered preferences. In homogeneous preferences the customers roughly have the same preferences whereas it varies in case of diffused preferences. When a group of consumers have shared preferences it leads to the formation of natural market segment which refers to clustered preference. While marketing a product three areas of marketing must be taken into consideration, i.e, mass marketing, product differentiated marketing and target marketing. Mass marketing takes into account mass producing, mass distributes and mass promotes on product to all buyers. It is important to realize the great variety in individual customers and therefore the marketers use this type of segmentation to customize their marketing programmes for each customer. In product differentiated marketing more than one product with different features, style, size, and quality is introduced. In target marketing, on the basis of the market segments the products are developed and customized.