Segmentation vs. Targeting: Grouping Criteria, Selection, and a Worked Example
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Category: Marketing Glossary
Authors: Shusaku Yosa
Segmentation groups a market by shared needs or characteristics. Targeting selects the groups an organization intends to serve. Distinguishing “we divided the market” from “we chose a target” makes the next decisions clearer: what to offer, whom to reach, and which opportunities to defer.
Compare the questions and outputs
Element | Segmentation | Targeting |
|---|---|---|
Question | Which differences matter? | Where should resources go? |
Inputs | Needs, behavior, and buying conditions | Segment characteristics and organizational capacity |
Work | Organize similarities and differences | Compare benefit, reach, cost, and fit |
Output | Groups and their evidence | Selection, exclusion reasons, and approach |
This is not a rigid sequence that can be completed only once. Service costs may reveal that a proposed grouping is impractical. Customer conversations may change the target hypothesis. OpenStax’s target-market discussion provides a formal background, while the practical objective remains a defensible decision about whom to serve.
Group where the offer or response should change
Geographic, demographic, attitudinal, and behavioral information can all suggest grouping criteria. But an available attribute is not automatically a useful one. People of the same age can have very different needs, while people with different backgrounds may face the same purchasing problem.
For a fictional reporting service, the team’s workflow, approval requirements, and deadline may matter more than the operator’s age. Treat the following as research possibilities rather than established market facts.
Possible grouping | Fictional distinction | Why it may affect action |
|---|---|---|
Problem | Repeated work versus changing requirements | Standardization versus flexibility |
Timing | Next report deadline versus early research | Trial and communication timing |
Existing process | Spreadsheets versus a dedicated system | Switching work |
Authority | Direct decision versus formal approval | People and evidence needed |
Adding a fictional name and demographic detail does not replace research. Separate confirmed constraints and behavior from assumptions about motivation. The grouping should help answer a practical service or communication question.
Evaluate reach, distinctness, scale, and capacity
Ask whether the group can be reached at an acceptable cost, whether different action is justified, whether its size can be estimated, and whether the promised benefit can be delivered. The official OpenStax chapter on effective segments discusses these kinds of criteria. The evidence behind the decision matters more than memorizing a particular acronym.
Criterion | Question | Possible evidence |
|---|---|---|
Reach | Can the relevant people be contacted? | Channel research and inquiry sources |
Meaningful difference | Do needs or responses differ? | Interviews and comparable records |
Scale and economics | Can value justify the expense? | Population estimates and service costs |
Actionability | Can the organization deliver? | Staff time and operational capacity |
If you score candidates, treat the weights as explicit judgment assumptions. A small difference in totals is not a scientifically established ranking. Use the exercise to reveal missing evidence and sensitive assumptions.
Choose a broad, multiple, or concentrated approach
An organization may offer common value broadly, develop different offers for several groups, or focus resources on one group. None is always superior. Compare the benefit of adaptation with production, acquisition, and support costs.
In the fictional reporting example, the initial target is a small team producing repeatable reports. Supporting complex consolidated reporting at the same time may exceed the assumed delivery scope. Narrowing the target is useful only if it creates a clearer and more deliverable promise, not because narrowness is inherently strategic.
Write the chosen, excluded, and uncertain cases
Candidate | Reason or need | Initial response |
|---|---|---|
Small team with repeatable reports | Repeated work fits the assumed offer | Trial candidate; confirm authority and switching effort |
Frequently changing formats | Flexibility requirements may raise cost | Investigate before choosing |
Complex consolidated reporting | Extensive controls and connections required | Outside current scope |
This is a hypothetical decision table, not a real demand or performance assessment. Exclusion should state the present constraint rather than label a group unattractive forever. Record the review date and what would justify reconsideration.
Share the criteria with sales, marketing, and delivery. Otherwise, different teams may pursue different customers while using the same target label. A usable selection statement should identify the problem, constraints, and evidence needed to qualify an opportunity.
Learn from customers and connect to the next decision
Segmentation and targeting do not require one-way communication. Research and dialogue can inform both. Co-creation is also not a mandatory final stage of STP: it concerns how customers participate in developing value, which is a different design question.
- Keep the evidence and confirmation date behind each criterion.
- Investigate nonpurchase reasons and changes in exclusion conditions.
- Revisit the offer, cost, and channels when the target changes.
Continue with a complete STP worksheet for positioning and execution, one-to-one marketing for individual relationships, or co-creation marketing for participation design. The output should be a reasoned choice that can change when better evidence arrives.
