Marketing
8220
REV: DECEMBER 19, 2019
TEACHING NOTE
SEGMENTATION AND TARGETING
I. Overview of Content
The purpose of this reading is to help students understand segmentation and targeting as fundamental
concepts in marketing. They will learn the primary variables used in both consumer and business market
segmentation; what constitutes good segmentation; how segmentation is done; and why and how
organizations choose to target particular segments. The material draws on seminal academic research, but
emphasizes real-world examples.
Section 2.1 defines segmentation, placing it in context as a key marketing tool which enables
organizations to tailor their offerings to consumer groups, identify market opportunities, and improve
customer satisfaction by enhancing convenience, relevance, and other key facets of the buying experience.
The section lists and describes the six characteristics of a useful segmentation: identifiable, substantial,
accessible, stable, differentiable, and actionable.
Section 2.2 discusses the actual segmentation process. After describing common variables used to
define who customers are (demographics, psychographics, geography, etc.), the material explains the
importance of exploring what customers have done (usage, loyalty, profitability) and why they have
made particular buying decisions (needs, preferences, decision processes). This section also introduces
the six-part GE Healthcare video case, which illustrates how marketing strategy is informed by “who,
what, and why” customer insights.
Section 2.3 covers the fundamentals of targeting. It focuses on three factors that should guide target
selection: segment characteristics, such as size and profitability; the firm’s own resources and
, competencies; and the nature of competition. Students will also learn why a choice of target depends on
the level of segmentation in a given market, which can range from mass market to mass customization.
Section 2.4 exposes students to some of the ethical and privacy concerns that marketers need to
consider when finalizing a segmentation and targeting strategy. For instance, consumers have protested
companies’ collection and use of highly personal data, such as whether a woman is pregnant.
The reading concludes by tying segmentation and targeting to the organization’s resource allocation
and marketing strategy. Section 2.5 offers multiple examples of segmentation-driven strategic choices
involving product, price, communication, salesforce, and customer management. The Supplemental
Reading provides a general, qualitative introduction to three common analytical segmentation
techniques: cluster analysis, preference-based segmentation, and response-based segmentation.
II. Placement
This reading can be covered in one or two classes. If done in one class, the instructor can divide the
lecture evenly between the topics of segmentation (Sections 2.1 and 2.2) and targeting/strategy
applications (Sections 2.3–2.5). When covered in an introductory marketing course, the material is best
scheduled after students have gained a basic understanding of consumer behavior. Segmentation and
targeting discussion can be followed by sessions on 4 Ps (product, price, promotion and place). See
additional Core Readings on these topics at https://hbsp.harvard.edu/catalog/collection/a340db41.
If taught over two or three class sessions, a recommended sequencing/grouping of the sections is as
follows.
Section 2.1
If possible, this section should be covered in a stand-alone lecture to place appropriate emphasis on the
importance of segmentation and to fully explain the factors that contribute to a useful segmentation. A
key theme to bring out is that segmentation benefits both buyer and seller; students should understand
that it is not a tool used by marketers to exploit consumers or create needs that don’t exist.
Class discussion may be enriched by discussing the role of segmentation in the 2012 Obama U.S.
presidential election campaign, which successfully identified groups of young voters with unmet
“needs”—e.g., a strong sense of dissatisfaction with the status quo. These voter groups met the six criteria
of a useful segmentation: they were identifiable based on their youth and Democratic-leaning voting
behavior; substantial in number; accessible through social media; stable for a long enough period to
mount a campaign; differentiable from older, Republican-leaning voters; and actionable via specialized
communications.
Section 2.2
The central point of this section is that segmentation is more of an art than a science. However, the
instructor should stress that good segmentation can be rigorous, and involves better understanding who
consumers are, what they have done, and why they have made prior decisions. Students should be
encouraged to think about how effective segmentation has influenced their own consumption decisions;
for example, they may buy products recommended by Amazon on the basis of their past purchases, or
use reward cards provided by Starbucks to loyal customers.
Consumer segmentation is more intuitive than business market segmentation for most students, so
the instructor may need to spend extra time explaining such concepts as “firmographics” and business
buying criteria. A simple in-class exercise is to have them divide universities into market segments and
compare the likely purchasing characteristics of different segments. For example, state universities with
8220 | Teaching Note: Segmentation and Targeting 2
8220
REV: DECEMBER 19, 2019
TEACHING NOTE
SEGMENTATION AND TARGETING
I. Overview of Content
The purpose of this reading is to help students understand segmentation and targeting as fundamental
concepts in marketing. They will learn the primary variables used in both consumer and business market
segmentation; what constitutes good segmentation; how segmentation is done; and why and how
organizations choose to target particular segments. The material draws on seminal academic research, but
emphasizes real-world examples.
Section 2.1 defines segmentation, placing it in context as a key marketing tool which enables
organizations to tailor their offerings to consumer groups, identify market opportunities, and improve
customer satisfaction by enhancing convenience, relevance, and other key facets of the buying experience.
The section lists and describes the six characteristics of a useful segmentation: identifiable, substantial,
accessible, stable, differentiable, and actionable.
Section 2.2 discusses the actual segmentation process. After describing common variables used to
define who customers are (demographics, psychographics, geography, etc.), the material explains the
importance of exploring what customers have done (usage, loyalty, profitability) and why they have
made particular buying decisions (needs, preferences, decision processes). This section also introduces
the six-part GE Healthcare video case, which illustrates how marketing strategy is informed by “who,
what, and why” customer insights.
Section 2.3 covers the fundamentals of targeting. It focuses on three factors that should guide target
selection: segment characteristics, such as size and profitability; the firm’s own resources and
, competencies; and the nature of competition. Students will also learn why a choice of target depends on
the level of segmentation in a given market, which can range from mass market to mass customization.
Section 2.4 exposes students to some of the ethical and privacy concerns that marketers need to
consider when finalizing a segmentation and targeting strategy. For instance, consumers have protested
companies’ collection and use of highly personal data, such as whether a woman is pregnant.
The reading concludes by tying segmentation and targeting to the organization’s resource allocation
and marketing strategy. Section 2.5 offers multiple examples of segmentation-driven strategic choices
involving product, price, communication, salesforce, and customer management. The Supplemental
Reading provides a general, qualitative introduction to three common analytical segmentation
techniques: cluster analysis, preference-based segmentation, and response-based segmentation.
II. Placement
This reading can be covered in one or two classes. If done in one class, the instructor can divide the
lecture evenly between the topics of segmentation (Sections 2.1 and 2.2) and targeting/strategy
applications (Sections 2.3–2.5). When covered in an introductory marketing course, the material is best
scheduled after students have gained a basic understanding of consumer behavior. Segmentation and
targeting discussion can be followed by sessions on 4 Ps (product, price, promotion and place). See
additional Core Readings on these topics at https://hbsp.harvard.edu/catalog/collection/a340db41.
If taught over two or three class sessions, a recommended sequencing/grouping of the sections is as
follows.
Section 2.1
If possible, this section should be covered in a stand-alone lecture to place appropriate emphasis on the
importance of segmentation and to fully explain the factors that contribute to a useful segmentation. A
key theme to bring out is that segmentation benefits both buyer and seller; students should understand
that it is not a tool used by marketers to exploit consumers or create needs that don’t exist.
Class discussion may be enriched by discussing the role of segmentation in the 2012 Obama U.S.
presidential election campaign, which successfully identified groups of young voters with unmet
“needs”—e.g., a strong sense of dissatisfaction with the status quo. These voter groups met the six criteria
of a useful segmentation: they were identifiable based on their youth and Democratic-leaning voting
behavior; substantial in number; accessible through social media; stable for a long enough period to
mount a campaign; differentiable from older, Republican-leaning voters; and actionable via specialized
communications.
Section 2.2
The central point of this section is that segmentation is more of an art than a science. However, the
instructor should stress that good segmentation can be rigorous, and involves better understanding who
consumers are, what they have done, and why they have made prior decisions. Students should be
encouraged to think about how effective segmentation has influenced their own consumption decisions;
for example, they may buy products recommended by Amazon on the basis of their past purchases, or
use reward cards provided by Starbucks to loyal customers.
Consumer segmentation is more intuitive than business market segmentation for most students, so
the instructor may need to spend extra time explaining such concepts as “firmographics” and business
buying criteria. A simple in-class exercise is to have them divide universities into market segments and
compare the likely purchasing characteristics of different segments. For example, state universities with
8220 | Teaching Note: Segmentation and Targeting 2
