Segmentation and targeting are concepts in marketing. They are different phases in the marketing process. Companies cannot function by simply creating products and selling them. There are lots of steps in between. Companies need a target population to sell their products and services to. Segmentation is the first step in marketing and involves finding and dividing a population into subgroups. Targeting is the second step. It is the process of choosing a specific target group.
This article explores the different processes in segmentation and targeting. How they work and their differences.
Segmentation vs Targeting
Segmentation and targeting are different phases of the same process. In segmentation, marketers divide a population of potential consumers into different subgroups. This method is the first phase in marketing. Marketers divide the heterogeneous population into smaller homogeneous subgroups according to demographic, geographic, behavioural, and psychographic characteristics. Through segmentation, marketers assume that consumers having similar characteristics have similar needs and purchasing habits. Segmentation is necessary because it helps marketers learn more about their potential consumers.
Targeting comes after segmentation. It is the second phase of marketing. In targeting, marketers choose one subgroup to focus their products on. They choose a group based on the group's attractiveness and the company's available resources. Targeting is necessary because by choosing one group, marketers can focus all their resources and attention on one group instead of the population as a whole.
Difference between Segmentation and Targeting in Tabular Form
|Parameters of Comparison
|Dividing a heterogeneous population into homogeneous subgroups
|Choosing one population subgroup to focus your product
|Stage of marketing
|The division depends on needs, motives, wants, behavioural characteristics, purchasing behaviour, etc.
|Choosing a group is based on their attractiveness
|The entire population
|Potential consumers who share similar characteristics
|Weighing the appeal of the group with the company's available resources
|Differentiation and grouping
|Developing unique strategies for the identified target group
What is Segmentation?
When marketers have a new product or service for sale, they need to choose a population to sell it. Segmentation helps to make ease this process. In segmentation, marketers divide a large population group into different smaller groups. This division of population happens on some common characteristics.
Segmentation helps the makers to study and understand the population better. A population as a whole is heterogeneous. However, through segmentation, marketers divide the population into smaller homogeneous groups. When a marketer knows about the population’s wants, needs, motives, and purchasing habits, they can choose one group to focus their products on. In-depth knowledge about different population groups also allows marketers to create and adapt their products and services specific to those groups.
Different Methods of Market Segmentation
Demographic segmentation involves dividing the population into groups based on their demographic structures. This method assumes that people in the same demographic group will have similar needs and purchase habits.
Demographic segmentation focuses on age, income, life-cycle stage, occupation, sex, family size, etc. The demographic segmentation method is the most preferred method of segmentation.
Demographic segmentation is helpful when your product is for a specific target group, for example, females or males. Some products are exclusively for one sex group. Through demographic segmentation, marketers can understand this group's needs and purchasing habits and promote their products better according to the group's needs.
The same applies to all other demographic characteristics. Individuals from different ages and life stages prefer different things.
Geographic segmentation involves dividing a population based on geographic characteristics. This method is because people from different regions have different wants. The geographic segmentation method focuses on characteristics like country, neighbourhood, state, city, climate, lifestyle, common languages, etc. Multinational corporations opt for this method.
Psychographic segmentation involves dividing a population based on their intrinsic traits, habits, hobbies, etc. This method focuses on the unique psychological factors of potential consumers. Psychographic information about a person includes preferences like quality over quantity, career or family, socialite or small friend group, concern about physical appearance, etc.
The psychographic segmentation method divides a population on characteristics like the style of the consumer, personality traits, values adopted by the consumer, etc.
Marketers obtain psychographic information about a population group through techniques like interviews. They may conduct personal interviews or one-on-one interviews. Sending out surveys is also an efficient method to gain information. Another method is analyzing how customers interact with your website.
Behavioural segmentation involves dividing a population based on their behavioural patterns when they are making decisions about purchasing a particular product.
This method divides the population based on the characteristics like occasions (Christmas, birthdays, Easter, Religious festivals), usage rate, user status, loyalty, buying for benefits, etc.
Steps involved in market segmentation
Step 1: Determining objectives
One cannot simply go ahead and do market segmentation. Marketers should determine why they are dividing the population. What is the ultimate goal? What information are you hoping to gain after segmentation? Once marketers can answer these questions and finalise their objectives, they can move on to the next step.
Step 2: Discover potential customers
After finalising objectives, marketers need to identify potential customers. This step involves,
- Finding out the target population of competitors
- Deciding which segmentation method to use (demographic, geographic, behavioural, or psychographic)
- Going through and learning relevant information about your specific market
This step involves,
- Identifying the pros and cons of the chosen segmentation method
- Discern whether it is beneficial to choose one population subgroup over the other subgroups
- Find out if there are any long-term repercussions in choosing one type of population
Step 4: Develop a strategy to segment the population
After deciding on your objective and a method of segmentation, you need to develop a strategy to carry out the population division. Decide how to divide, and how to measure your results.
Step 5: Launch your method and monitor
The final step is to launch your method. Divide the population based on the chosen characteristics and gain information. After launching, monitor the effects and benefits or disadvantages of the chosen method. If the method is not working, review and improve or chose a different method.
Advantages of Segmentation
Improves resource efficiency
Segmenting the population allows the markers to focus their resources on a single group instead of the entire population. This helps reduce the cost of marketing. Through segmentation, the marketer can use their available resources in the most optimal manner.
Strengthens brand name
By engaging in market segmentation, marketers now only have to focus on one single group. They can design and construct their advertisements and promotions in a way that is appealing to that specific subgroup. Increased focus on one subgroup can also help improve customer experiences.
Garners brand loyalty
By focusing on only one group, marketers have a greater opportunity to build long-lasting relationships with their consumers. Personal marketing strategies aimed at one subgroup can help create feelings of inclusion and belongingness among consumers.
Through segmentation method, marketers can create different and unique messages for their consumers. This differentiation of messages helps consumers realise your product from the competitors.
Improves targeted digital marketing
Segmentation allows marketers to create better advertisements for their audience. Whether advertising on social media platforms or other online methods, segmentation helps to focus on a specific group.
Disadvantages of segmentation
Market segmentation is a costly method. Marketers need to spend money and resources conducting research into potential populations, collecting data, and adapting their products.
Sometimes large companies conduct segmentation for its different products. That is, instead of creating products for a population as a whole, companies create one product for a subgroup and another product for a different subgroup. This raises confusion and inconsistency about its overall brand image.
Risk of misassumptions
Through market segmentation, marketers assume that individuals belonging to a certain subgroup have similar needs, interests, and buying habits. In reality, this may not always be correct. Hence, market segmentation can lead to marketers making erroneous assumptions about a population subgroup.
Increased reliance on available data
Market segmentation focuses on already available and reliable data. However, this information is subject to change with the changing market trends and population needs. Marketers need to be aware of the changes if they want to gain more consumers.
Is segmentation necessary?
When you are doing business, you need to do everything possible to improve your products and attract more consumers. Simply creating a product and waiting for someone to purchase it, is not an option.
One way to gain more consumers is to understand your potential consumers. There is a reason why consumers prefer one brand to the other for the same products. Potential consumers will differ from each other in many ways including preferred benefits, the price at which they are willing to make a purchase, how much quantities of an item they require, etc. The segmentation method allows a marketer to gain useful knowledge about their potential population groups.
What is Targeting?
Targeting is a market strategy initiated after segmentation. Segmentation divides a population into different groups. This method of division helps marketers to understand their potential customers. After learning about the different population groups and their preferences, the marketers then choose one group to focus on their products or services. This selection of a particular group is targeting. In simple terms, targeting is choosing one group among many others.
Targeting a specific subgroup of the population depends on the marketers’ ultimate goal. Often, marketers chose the subgroup, which will bring them the highest profits. Other factors that influence a marketer’s choice include the company’s resources, the features of the particular product and the characteristics of the subgroups.
Different methods of targeting
Concentrated marketing has an alternative name, “niche marketing”. In this method, marketers concentrate on one specific subgroup at a time. They aim to produce the best product and become the top brand for that particular subgroup.
Differentiated marketing has an alternative name, “multi-segmented marketing”. In differentiated marketing, marketers focus on more than one subgroup of the divided population. The marketers provide a diverse marketing mix (different products, prices, places, and promotions) to the different subgroups.
In the undifferentiated marketing method, the marketers sell one product needed by the entire population, regardless of their group. This product is one of necessity. The approach in use here is the “scattergun approach”.
Different targeting strategies
- Standardization: In standardization, marketers offer similar products and services to different subgroups. They use the same methods of communication, promotion, same prices, and distribution for all the subgroups.
- Differentiation: In differentiation, marketers create distinct products for different subgroups. Different subgroups receive unique products that focus on their specific needs and interests.
- Focus: The focus method is a blend of both standardization and differentiation strategies.
Advantages of targeting
- Tailoring of Products: Targeting means marketers can tailor their products to meet the demands of the specific subgroup. This increases brand awareness and helps increase sales for that particular product.
- Helps area selection: In targeting, marketers choose a subgroup after learning about them. They know where the customers from that subgroup prefer to travel to shop. Hence, through targeting, marketers know where to set up shop to maximise sales.
- Ideal pricing: Marketers know about the spending habits of their subgroup. This helps them to create an ideal price. That is a price at which consumers will surely purchase the product. Hence, targeting helps to increase product sales.
- Tailoring promotions: Focusing on one group allows marketers to focus their resources to create advertisements and promotions that suit that particular subgroup. Marketers do not have to worry about creating promotional content for the entire population. Focused promotions appeal to consumers more and bring them in.
Main Differences between Segmentation and Targeting (in Points)
- Segmentation is a technique in marketing by which marketers divide a large population into different subgroups. Targeting is a technique by which marketers choose one subgroup to focus their products and service.
- Segmentation focuses on the population as a whole. Targeting focuses on one specific subgroup.
- Segmentation is the first step towards marketing a product. Targeting is the second step.
In short, segmentation and targeting are two techniques of marketing. Segmentation is the first step and involves finding and dividing a population into subgroups. Targeting is the second step. Targeting is choosing a specific targeting group to focus your products on. When marketing any products or services, it is necessary to follow these two steps to increase profits.