🎓 Prepared by students from Boğaziçi University

What is Market Segmentation and Targeting?

Market segmentation is dividing a large, diverse market into smaller, similar groups (age, income, interests, geography). Targeting is choosing which segments to focus on. Together, they help companies reach the right customers with the right message.

Short answer

Segmentation splits a market into distinct groups based on shared characteristics. Targeting means selecting one or more segments to pursue. This allows companies to tailor products and marketing to specific customer types.

Segmentation and Targeting Process

1
Identify market
Define the broad market you want to reach (e.g., 'people who exercise')
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2
Segment the market
Divide into groups: age, income, lifestyle, geography, values, behavior
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3
Profile each segment
Describe who they are, what they want, how much they spend, where they shop
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4
Evaluate segments
Assess size, growth, profitability, and competition for each segment
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5
Select target
Choose one or more segments that fit your company's strengths and goals
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6
Tailor marketing
Create product, price, place, and promotion (4Ps) for each target segment

Step-by-step worked examples

A smartphone company identifies three segments: students (budget-conscious), professionals (features), elderly (simplicity). How should they segment and target?

Segmentation criteria: age, income, tech comfort. Profile: students buy <$300, want good camera; professionals buy $600+, need productivity apps; elderly want large text, simple interface. Targeting: if company excels at low-cost production, target students. If known for premium, target professionals.

A coffee shop in a city neighborhood wants to grow. Who might they target?

Segments: commuters (morning, quick), office workers (lunch), students (afternoon), tourists (browsing). Profile: commuters want fast service, students want WiFi/seating. Target: students and office workers (high volume). Tailor: add WiFi, cozy seating, lunch combo deals.

A cosmetics brand uses segmentation: premium luxury, mid-market, budget. Why might they have different pricing?

Segmentation by income and lifestyle. Luxury segment: expensive ads, exclusive stores, premium packaging, $100+ price. Budget segment: drugstore shelves, digital ads, simple packaging, $10. Same product quality might differ slightly, but strategy is tailored to each segment's willingness to pay.

Flashcards

Quick quiz

Q1.Which of these is a demographic segmentation variable?

Correct answer: B. Demographics include age, income, education, gender — factual characteristics. The others are behavior or psychographics.

Q2.A sportswear brand targets athletes and fitness enthusiasts. They ignore casual shoppers. Is this good targeting?

Correct answer: B. Focusing on a specific, well-defined segment (athletes) allows the brand to tailor products and marketing, increasing efficiency.

Q3.Why might different segments of the same market need different prices?

Correct answer: B. A premium segment (high income) will pay more; a budget segment (lower income) is price-sensitive. Pricing should reflect each segment.

Q4.Market segmentation and targeting help companies…

Correct answer: B. By targeting specific segments, companies can focus budget, tailor products, and serve customers more effectively than trying to reach everyone.

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Common mistakes

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Segmentation = dividing customers randomly into small groups. — Correct: Segments should be based on meaningful, shared characteristics (age, income, location, values).

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All segments should be targeted with the same marketing message. — Correct: Each segment needs tailored messaging, positioning, pricing, and product features.

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Targeting the largest segment is always best. — Correct: The best target is a segment that matches the company's strengths, where you can compete profitably.

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Once segments are chosen, they never change. — Correct: Markets evolve. Companies re-segment and re-target as customer needs, demographics, and competition shift.

FAQ

What is the difference between segmentation and targeting?

Segmentation divides the market into groups. Targeting is choosing which group(s) to focus on and serve.

Can a company target multiple segments?

Yes. Many large companies target 2–3 segments with tailored strategies for each, or even a 'mass market' approach if segments are similar.

How do you know if a segment is worth targeting?

Evaluate: size (enough customers?), growth (is it growing?), profitability (can you make money?), and fit (do your strengths match their needs?).

What is an example of a psychographic segmentation variable?

Values, lifestyle, interests, and attitudes. Example: environmentally conscious consumers, or people who value luxury and exclusivity.