Final answer:
The statement about dividing the market into smaller portions based on common characteristics being called stereotyping is false; the correct term for this process is market segmentation.
Step-by-step explanation:
The process of dividing the market into smaller portions of people that have certain common characteristics is false; this process is not called stereotyping but is known as market segmentation. Stereotyping refers to an oversimplified, often negative, belief about individuals generalized to all people within that group. In contrast, market segmentation is a strategic tool used by businesses to target products and services more effectively to specific subsets of potential consumers who share similar characteristics.
While stereotypes are oversimplified generalizations that do not account for individual differences, market segmentation recognizes that individuals within a certain demographic or psychographic profile may respond positively to similar marketing approaches.
However, both concepts deal with categorizations of people; a stereotype does so in a generalized, often pejorative manner, whereas market segmentation aims to address specific needs and preferences of customers in a more personalized way.