Define the following term as used in business studies.

Market segmentation

Market segmentation is the process of dividing a market of potential customers into distinct groups or segments based on specific characteristics such as demographics, psychographics, behavior, or needs. This allows businesses to tailor their marketing strategies and products/services to better meet the needs and preferences of each segment, ultimately increasing the effectiveness of their marketing efforts and driving sales.

Profitability

Profitability is a measure of a business's financial performance. It refers to the ability of a business to generate profits over a period of time. Profitability can be measured in several ways, including:

- Gross profit margin: The percentage of sales revenue that remains after deducting the cost of goods sold.
- Operating profit margin: The percentage of sales revenue that remains after deducting operating expenses.
- Net profit margin: The percentage of sales revenue that remains after deducting all expenses, including interest and taxes.

Profitability is important because it indicates how well a business is able to generate profits. A business that is not profitable is not sustainable in the long run. There are several factors that can affect profitability, including:

- Pricing: The prices that a business charges for its products or services.
- Costs: The costs that a business incurs, such as the cost of goods sold, labor costs, and marketing costs.
- Sales volume: The number of products or services that a business sells.
- Competition: The competitive landscape in which a business operates.

Businesses can improve profitability by increasing sales, reducing costs, or both.

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