Product marketers (PMMs) love fancy terms. But all that jargon can get confusing fast. Market segmentation? Target markets? They sound awfully similar. And getting them mixed up could completely tank your marketing efforts.
So let’s break it down in simple terms: What do these two foundational marketing concepts really mean, and how do they work together? We’ll clear up the distinctions with easy-to-grasp examples so you can start applying them like a pro.
Segmenting 101: Dividing your market into strategic groups
What is market segmentation?
Market segmentation is a strategic approach that involves dividing a broader market into smaller, more manageable segments based on certain common characteristics, needs, or behaviors. There are four key market segmentation categories used to help marketers group customers and prospects, those are:
- Demographic information: Age, gender, occupation, etc.
- Geographic information: Location, timezone, language, Density (urban, suburban, exurban, rural), etc.
- Behavioral information: Buying process, occasion and timing, benefits sought, customer loyalty, customer journey stage, engagement level, etc.
- Psychographic information: Lifestyle, opinions, values, etc.
The goal of segmentation is to identify specific groups within the market that share similar traits, making it easier for you to tailor marketing efforts to their specific preferences and needs.
Here’s an example:
Imagine you sell smartphones. Your total potential market includes all smartphone-using humans on Planet Earth. This means you’ve got a lot of people to market to… but it’s not super helpful for creating a killer strategy or devising a meticulous marketing budget.
That’s why smart brands use segmentation. This just means splitting up the market into smaller groups defined by common qualities. Like “tech enthusiasts,” “budget-conscious consumers,” and “business professionals.”
So, you’ll start by digging into research and analyzing your findings to spot key ways to categorize customers. This allows you to create specific segments based on needs, behaviors, interests, demographics, or other factors.
Psst. From here, you can dive even further by creating buyer personas.
Why bother? So you can understand core groups who want/need different tech offerings, target products and messaging accordingly, and address (or preempt) any potential pain points.
Targeting: Picking your prime segment(s) to pursue
Okay, now you’ve identified market segments for your business, you need to select target markets.
What is a target market?
Target markets are the specific groups or segments within the broader market that you choose to focus your marketing efforts on. They’re the audiences that are most likely to be interested in the product or service you’re offering.
As with market segments, target markets are defined based on factors like demographics, psychographics, geography, and behavior. These are just one or more of those segments you’ll pursue with tailored products and marketing. Targeting is about concentrating your strategy on the best opportunities.
Sticking with the smartphone example:
Let's say you decide to target the "tech enthusiasts" segment. This group is characterized by their love for cutting-edge technology and willingness to pay a premium for the latest features.
You’d focus your marketing efforts on the key aspects that’ll likely appeal to this specific segment, such as its innovative functionality, top-of-the-range camera lens, optimized UI (user interface), or cutting-edge physical design.
As the product marketing pro that you are, you’d then use this information to tailor your marketing campaigns to appeal specifically to this segment.
Target markets should match your positioning and give the highest potential ROI. It's all about focusing your marketing mix where it'll be most effective.
Why segmentation and targeting go hand in hand
Now it’s easy to see how these two work together:
- Segmentation provides the foundation by identifying distinct consumer groups.
- Targeting then picks the best segments to pursue based on strategy.
- Target markets are just selected clusters from broader segmentation.
It’s a powerful integrated framework for allocating marketing resources. Segmentation and targeting allow you to truly focus your efforts by eliminating waste and concentrating strategy and spending where it'll resonate most.
Key differences between market segmentation and target markets
Scope and purpose
Market Segmentation: It's the process of dividing the entire market into segments.
Target Markets: It's the selection of specific segments to focus marketing efforts on.
Level of specificity
Market Segmentation: Provides a broad overview of different segments within the market.
Target Markets: Narrow down to specific segments with the highest potential for conversion.
Use of data
Market Segmentation: Involves data analysis to identify segments.
Target Markets: Involves data analysis to choose the most promising segments.
Marketing strategy
Market Segmentation: Guides the overall marketing strategy by highlighting potential customer groups.
Target Markets: Directly informs the tactics and messaging used to reach the chosen segments.
Resource Allocation
Market Segmentation: Helps allocate resources effectively across various segments.
Target Markets: Requires more focused allocation of resources to maximize impact.
Customization
Market Segmentation: Allows for some customization but at a broader level.
Target Markets: Requires highly tailored marketing efforts to meet specific segment needs.
Real-world examples
Let’s see how leading brands apply segmentation and targeting in the real world:
Uber
Rideshare apps like Uber make it super streamlined for people looking for transport in a specific area. With just a few clicks, they can find their perfect ride to the desired destination.
Uber utilizes the four key market segmentation pools:
Demographic criteria:
- Age
- Occupation
Geographic criteria:
- Region
- Density (e.g. urban/rural)
Behavioral criteria:
- Degree of loyalty
- User status (e.g. non-users, potential users, first-time users, regular users)
- Benefits sought (e.g. cost-efficiency, convenience)
Psychographic criteria:
- Lifestyle (e.g. explorers, luxury riders, frugal travelers)
Uber then targets the customer segment with the applicable vehicle, for example:
- UberX Share: Sharing a ride with a co-rider
- Uber Green: Riding in an electric vehicle
- Bikes: On-demand electric bikes
- UberXL: Available for groups of up to six
- Uber Black: Premium rides in luxury cars
And more.
Apple
With a super diverse product line, tech giant, Apple, is one of the most successful companies going.
Apple utilizes the four key market segmentation pools:
Demographic criteria:
- Age
- Occupation
Geographic criteria:
- Region
- Density (e.g. urban/rural)
Behavioral criteria:
- Degree of loyalty
- User status (e.g. non-users, potential users, first-time users, regular users)
- Benefits sought (e.g. self-expression, speed of service, advanced features)
Psychographic criteria:
- Lifestyle (e.g. ambitious, tech-centric, those seeking a sense of belonging)
Apple then targets the customer segment with the applicable product, for example:
- iPhone
- iPad
- Mac
- AirPods
- Watch
- HomePod
- Apple Music
And more.
Apple’s target market is vast, and its product line reflects this. Apple’s success is down to not just a huge range of products, but accurate and compelling branding and marketing, designing a wide range of solutions for both digital and brick-and-mortar companies.
Enough of the big brand names, let’s take a quick look at an example of how a general brand would use segmentation and targeting of a specific buyer. We’re gonna use the example of a pet supplies retailer, named Pet Dynamics which is targeting the buyer persona, Dog-lover Dina.
Pet Dynamics
Pet Dynamics is a pet supplies retail store that provides buyers with everything from food, toys, bedding, medication, accessories, and more. Dog-lover Dina is one of Pet Dynamics’s target consumers.
Dog-lover Dina’s segmentation profile:
Demographic criteria:
- Age: 29 - 38
- Lifecycle stage: Child-free adult
- Occupation: Executive
Geographic criteria:
- Region: Middle America
- Density: Suburban
Behavioral criteria:
- Degree of loyalty: Hard-core loyal user
- Buyer status: Regular buyer
- Benefits sought: Quality of products
Psychographic criteria:
- Lifestyle: Believes in giving her pet only the best quality, spends time outdoors with her canine companion.
Pet Dynamics then targets Dog-lover Dina with the applicable products, for example:
- Premium pet food
- High-quality accessories (collar, walking harness, etc.)
- First-rate treats and toys
- Pet insurance
And so on.
You’ve (hopefully) now got a good idea of what a market segment is, what a target market is, why the two go hand in hand as well as the key differences between the two.
Before we get into executing an integrated approach and the bottom line, let’s take a quick peek at the advantages and applications of segmentation vs. targeting.
Advantages and applications of market segmentation vs. market targeting
Key advantages and applications of market segmentation
Enhanced understanding: Provides a deep understanding of the market's diversity.
Risk mitigation: Reduces the risk of a one-size-fits-all marketing approach failing.
Product development: Informs product design to cater to different customer needs.
Resource efficiency: Optimizes resource allocation by focusing on high-potential segments.
The advantages and applications of market targeting
Precision: Allows for precise targeting of customers who are more likely to convert.
Effective messaging: Tailored messaging resonates better with the chosen audience.
Improved ROI: Maximizes return on investment by directing resources where they matter most.
Competitive edge: Helps businesses stand out by addressing specific customer pain points.
Executing an integrated segmentation and targeting approach
While market segmentation and targeting are distinct concepts, they are closely intertwined in successful marketing strategies. Segmentation sets the stage by identifying potential customer groups, and targeting narrows down the focus to the most promising segments.
Think of segmentation as the "what" and targeting as the "how." Once you've identified segments that hold potential, you can strategically target them with marketing campaigns that speak directly to their needs and preferences. This synergy enhances the effectiveness of marketing efforts and increases the likelihood of conversion.
Want to master segmentation and targeting? Here are some tips:
- Immerse yourself in market research to spot potential segments and assess viability as targets. Surveys, focus groups, and data analysis are your friends!
- Choose segments that fit your brand and products. Target groups should be profitable and align with your organizational capabilities.
- Tailor marketing mix elements like product, pricing, distribution, and messaging to match your targets.
- Review segments and targets frequently. Markets shift, so your approach should evolve accordingly.
Properly integrated, segmentation and targeting provide a roadmap to connect with audiences in a strategic, relevant way.
The bottom line
Market segmentation and target marketing are cornerstones of an effective marketing strategy. When used together, they provide powerful tools for reaching the consumers most likely to be interested in your brand.
Segmentation identifies distinct groups based on shared characteristics. Targeting then selects the best segments for tailored offers designed precisely to match their needs and preferences.
Now get out there and conquer your market!
