STP 1 – Segmentation and Targeting

Segmentation and Targeting: Pillars of Marketing Strategy

Have you ever poured your heart and soul into developing a product or service, only to find that it doesn’t resonate with anyone? The more effort and sincerity you invest, the more painful it feels when your work is overlooked. Yet with risk comes opportunity. Moments like these remind us just how essential marketing is—especially the role of segmentation.

Indeed, segmentation is so pivotal that it fundamentally shapes a company’s strategic decisions: from what products or services it chooses to develop, to how it delivers those offerings to the market, who it identifies as its true competitors, and ultimately, how it defines the scope of its market opportunities.

Beyond Demographics and Products

So, how can we effectively segment the market? Traditional criteria—such as customer demographics (e.g., male vs. female, Gen Z vs. Millennials) or product types (e.g., sedans vs. minivans)—remain useful tools. However, I believe the most powerful and insightful approach to market segmentation is one based on customer problems. This method provides clarity and direction for your entire marketing program. After all, the core principle in business remains simple: find a problem, then solve it.

To illustrate this, let’s turn to a widely recognized article: “Finding the Right Job For Your Product” by Clayton M. Christensen, Scott D. Anthony, Gerald Berstell, and Denise Nitterhouse, published in the MIT Sloan Management Review.

The article introduces the core concept that customers ‘hire’ a product or service to get a ‘job’ done. A classic example highlights this: a customer doesn’t buy a drill because they want the drill itself; they buy it because they need a hole. In this context, a “job” refers to the fundamental problem a customer needs to solve in a specific situation. The authors emphasize that to truly understand the customer’s job, marketers must focus on the situation the customer is in, rather than just their attributes or the product’s features.

The “Jobs to Be Done” Framework in Action: The Milkshake Example

Here’s a compelling example from the article itself:

A restaurant wanted to boost milkshake sales. Initially, it segmented its market using traditional product and customer profile analyses. Despite various product changes based on these insights, sales saw no improvement. A new researcher then tried a different approach: observation. They noticed that 40% of milkshakes were purchased early in the morning. These buyers were mostly lone commuters. Through interviews, a crucial insight emerged. Customers were “hiring” milkshakes to make their long, often boring, morning commutes more enjoyable. They also wanted to ward off mid-morning hunger. Milkshakes proved superior for this “job” compared to bagels, donuts, or bananas. They took about 20 minutes to drink. They kept hands clean while driving. And they effectively kept customers full until lunch.

Once marketers understood the specific “job” customers hired the milkshake for, product improvements and marketing efforts became clear. For instance, making the shake thicker helped it last longer during the commute. Adding fruit chunks made the experience more engaging. Conversely, making it “healthier” was not a priority. Customers weren’t hiring it for health benefits. Improving convenience also helped. Offering prepaid swipe cards, for example, sped up drive-through purchases. This directly helped fulfill the “job” more effectively.

Targeting: Choosing the Right Customers to Serve

When you segment the market based on customer problems—or the “jobs” they need to get done—you often naturally identify your primary target segment in the process. However, if your analysis uncovers multiple problems that your business could potentially solve, you’ll need to make a strategic choice about which segment to prioritize.

Here are some key considerations to guide that critical decision:

• Company Fit: Do you possess the right resources, capabilities, and expertise to effectively serve this segment?
• Profitability: Is the segment large enough, and does it offer sufficient growth potential and profitability to justify the investment? Consider factors like market size, growth rate, and customer acquisition costs.
• Defensibility: Can you protect your position within this segment? Are there opportunities to build barriers to entry or establish sustainable competitive advantages?
• Brand Alignment: Does serving this segment resonate with your company’s core mission, values, and long-term vision?
• Multi-segment Strategy: Can your business effectively serve more than one segment without diluting your focus or overstretching your resources, and is there a clear synergy between them?

Choosing the right target market is not merely a tactical step; it’s a strategic imperative that ensures your marketing efforts are not just creative, but also highly effective, sustainable, and ultimately drive long-term business success and deeper customer connections.

More about market segmentation