# Segmentation, Targeting and Positioning Concept Card: [Course, brand or market] > A concept card on segmentation, targeting and positioning (STP) for MBA marketing courses: segmentation bases, > segment attractiveness scoring, targeting strategies, the positioning statement, perceptual maps and the jobs to be > done lens. It is for MBA students preparing a core marketing exam, a case discussion or a marketing plan, and for > managers who must decide which customers to serve and how to be chosen by them. It follows the learning design of > the library: the idea in plain language, a formula with a notation table, Worked example A (fully solved), Worked > example B (half solved), Exercise C (unsolved), common mistakes, a self-test and a separate answer key. > Source basis: Smith (1956) on segmentation, Ries and Trout (1981) on positioning, Christensen, Hall, Dillon and > Duncan (2016) on jobs to be done, and standard MBA marketing practice, written up in original words with fictional > Northfield Outdoor Co. data. > Replace every [bracketed] value and every row marked *Example* with your own course or company data. ## Document control | Field | Value | |---|---| | Course or project | [Marketing management / marketing plan / client project] | | Learner or analyst | [Your name] | | Market definition | [Outdoor apparel and equipment, regional, consumers / your market] | | Data sources | [Survey n = 400 (fictional) / panel data / interviews] | | Reviewed by | [Study partner, tutor or mentor] | | Date | YYYY-MM-DD | | Version | [0.1] | ## When to use it Use STP whenever a firm decides **whom to serve and how to be preferred**: - **Entering a market or launching a product**: which buyers have the need, the budget and the access, and which of them the firm can serve better than rivals. - **Repositioning a brand** that is losing share or is stuck in the middle with no clear reason to choose it. - **Building a marketing plan** (`marketing/marketing-plan`) or a go-to-market plan (`marketing/go-to-market-plan`): STP is the step between the situation analysis and the marketing mix. - **Case discussions**: almost every marketing case asks, in some form, "who is the target, and what is the positioning?" STP is less useful when a market is truly homogeneous (a commodity bought on price alone) or when the firm has no ability to tailor product, price, channel or message to different groups. ## The idea in plain language Customers differ in what they need, what they value and how they buy. **Segmentation** splits a market into groups that respond differently to marketing; the groups must be measurable, large enough to be worth serving, reachable, different in their response, and actionable for the firm. Wendell Smith (1956) framed segmentation as an alternative to product differentiation: instead of bending demand to fit the product, the firm adjusts its offer to fit the demand of distinct groups. **Targeting** chooses which segments to serve, by weighing how attractive each segment is (size, growth, margin, competition) against the firm's ability to win there (fit with capabilities and brand). **Positioning** then defines the place the offer should occupy in the target customer's mind relative to the alternatives. Ries and Trout (1981) popularised the term and the idea that positioning is something done to the mind of the prospect, not to the product. In the MBA core, positioning is usually written as a **positioning statement**: for [target], [brand] is the [frame of reference] that [point of difference], because [reason to believe]. The **jobs to be done** lens (Christensen, Hall, Dillon and Duncan 2016) is a complementary way to segment: customers "hire" a product to make progress in a particular circumstance. Segmenting by the job and the circumstance, rather than by demographics, often explains choices that profiles miss. ## Segmentation bases | Base | Variables | Strength | Weakness | Northfield example *(Example)* | |---|---|---|---|---| | Geographic | Region, climate, urban or rural, distance to trails | Easy to measure and reach | Weak link to needs | Mountain towns versus city suburbs | | Demographic | Age, life stage, income, household size | Data available, media bought this way | People with the same profile can want very different things | Families with young children | | Psychographic | Values, lifestyle, personality, identity | Explains brand preference | Hard to measure reliably | "Gear minimalists" versus "comfort first" | | Behavioural | Usage occasion, frequency, loyalty, benefits sought, channel | Closest to purchase response | Requires transaction or survey data | Weekend camping versus multi-day alpine trips | | Needs or benefits | Desired outcomes, price sensitivity, performance needs | Most actionable for product and positioning | Needs research (conjoint, MaxDiff, interviews) | Weight saving versus durability versus price | | Jobs to be done | Progress sought in a circumstance | Reveals non-obvious competitors | Qualitative, harder to size | "Help me run a trail after work without carrying much" | | Business markets (B2B) | Industry, firm size, buying centre, purchase process | Reflects how organisations buy | Several decision makers per account | Outdoor-education centres | **Segmentation methods.** A priori segmentation uses a known variable (for example, region). Post hoc segmentation groups customers from survey or transaction data, usually with factor analysis to reduce attitude items (`academic/stats-reliability-factor-analysis`) followed by cluster analysis (k-means or hierarchical). Whatever the method, test the result against the five criteria: measurable, substantial, accessible, differentiable, actionable. ## Formula: weighted segment attractiveness The most common tool for targeting is a weighted scoring model, a form of multi-attribute decision analysis: $$A_s = \sum_{c=1}^{C} w_c \, x_{s,c}, \qquad \sum_{c=1}^{C} w_c = 1$$ | Symbol | Meaning | Northfield example | |---|---|---| | $A_s$ | Attractiveness score of segment $s$ | 3.6 for S4 | | $w_c$ | Weight of criterion $c$ (share of importance) | 0.20 for size | | $x_{s,c}$ | Score of segment $s$ on criterion $c$, on a 1 to 5 scale where 5 is always best | 5 for S4 margin potential | | $C$ | Number of criteria | 6 | Criteria fall into two groups: **segment attractiveness** (size, growth, margin potential, competitive intensity, which connects to `mba/mba-five-forces-card`) and **firm fit** (capabilities, brand permission, channel access). Score every criterion so that higher is better: competitive intensity is scored 5 when competition is *low*. **Excel.** Weights in `B2:G2`, a segment's scores in `B3:G3`: `=SUMPRODUCT($B$2:$G$2,B3:G3)`. Check `=SUM(B2:G2)` returns 1. Turn scores into economics before you decide. Segment revenue potential is $\text{households} \times \text{annual category spend} \times \text{achievable share}$, and gross profit potential multiplies by the gross margin. A high score with a tiny profit pool is a niche, which may be the right answer, but say so. ## Worked example A (fully solved): where should Northfield's new trail range compete? **Situation (fictional).** Northfield Outdoor Co., a mid-size outdoor-gear retailer and brand with stores and e-commerce, plans a lightweight trail range. Research (survey of 400 regional outdoor buyers, interviews, transaction data) found four segments. The team agreed criteria and weights before scoring. | Criterion | Weight | S1 Weekend family campers | S2 Ultralight trail runners | S3 Urban commuters (outdoor look) | S4 Serious alpine hikers | |---|---|---|---|---|---| | Size | 0.20 | 5 | 2 | 4 | 2 | | Growth | 0.15 | 2 | 5 | 3 | 3 | | Margin potential | 0.20 | 2 | 4 | 3 | 5 | | Competitive intensity (5 = low) | 0.15 | 2 | 3 | 1 | 3 | | Fit with capabilities | 0.20 | 4 | 3 | 2 | 5 | | Reachability | 0.10 | 5 | 4 | 4 | 3 | | **Weighted score** | 1.00 | **3.30** | **3.40** | **2.80** | **3.60** | Example for S4: $0.20 \times 2 + 0.15 \times 3 + 0.20 \times 5 + 0.15 \times 3 + 0.20 \times 5 + 0.10 \times 3 = 0.40 + 0.45 + 1.00 + 0.45 + 1.00 + 0.30 = 3.60$. **Segment economics** (fictional regional data): | Segment | Households | Annual category spend (USD) | Market (USD m) | Achievable share | Revenue potential (USD m) | Gross margin | Gross profit potential (USD m) | |---|---|---|---|---|---|---|---| | S1 *(Example)* | 420,000 | 180 | 75.6 | 6% | 4.536 | 38% | 1.724 | | S2 *(Example)* | 95,000 | 520 | 49.4 | 10% | 4.940 | 50% | 2.470 | | S3 *(Example)* | 610,000 | 140 | 85.4 | 2% | 1.708 | 42% | 0.717 | | S4 *(Example)* | 70,000 | 760 | 53.2 | 12% | 6.384 | 52% | 3.320 | Excel for S4: market `=70000*760/10^6`, revenue potential `=70000*760*0.12/10^6`, gross profit `=70000*760*0.12*0.52/10^6`. **Analysis.** S4 (serious alpine hikers) ranks first on the score and on gross profit potential; S2 (ultralight trail runners) is second on both and grows fastest. S3 is the largest market but the least attractive: intense competition from fashion brands and weak fit. S1 is large and reachable, but low margin, and it is where Northfield's existing range already sells. **Check the competitive position before you decide.** The perceptual map below shows that a strong rival (Rival A) already sits close to the S4 ideal point (distance 0.78) while Northfield sits far from it (2.58). Northfield's current brand is closest to S1 (1.12). Winning S4 would require a long brand climb against an entrenched specialist. S2's ideal point is not yet owned: the nearest rival, Rival C, is at 0.81, and a Northfield sub-brand positioned at (4.5, 5.9) would be closer than any rival (0.41). **Recommendation.** Target S2 as the primary segment for the trail range (concentrated strategy for the new range), keep S1 with the core range, and treat S4 as a later extension once the sub-brand has earned technical credibility. The decision uses the score, the profit pool and the competitive map together; the score alone would have pointed to S4. ## Perceptual map A perceptual map plots how customers perceive brands on the attributes that drive choice, usually from survey ratings (attribute-based maps) or from overall similarity judgements (multidimensional scaling). Adding **ideal points** (where each segment would like a brand to be) turns the map into a targeting tool: gaps near an ideal point are opportunities, and crowded areas are battles. Northfield's survey (fictional, n = 400) asked buyers to rate five brands on perceived price level and perceived technical performance (1 to 7). Segment ideal points come from the same buyers rating their ideal brand. ```vega-lite { "$schema": "https://vega.github.io/schema/vega-lite/v5.json", "description": "Perceptual map of outdoor brands with segment ideal points (fictional survey, 1 to 7 scales)", "width": 400, "height": 320, "data": {"values": [ {"name": "Northfield", "price": 4.1, "performance": 4.4, "type": "Brand"}, {"name": "Rival A", "price": 6.2, "performance": 6.0, "type": "Brand"}, {"name": "Rival B", "price": 2.3, "performance": 2.9, "type": "Brand"}, {"name": "Rival C", "price": 5.0, "performance": 5.6, "type": "Brand"}, {"name": "Rival D", "price": 5.4, "performance": 3.2, "type": "Brand"}, {"name": "Ideal S2 trail runners", "price": 4.6, "performance": 6.3, "type": "Segment ideal point"}, {"name": "Ideal S4 alpine hikers", "price": 5.6, "performance": 6.5, "type": "Segment ideal point"}, {"name": "Ideal S1 family campers", "price": 3.0, "performance": 4.2, "type": "Segment ideal point"} ]}, "encoding": { "x": {"field": "price", "type": "quantitative", "title": "Perceived price level (1 = low, 7 = high)", "scale": {"domain": [1, 7]}}, "y": {"field": "performance", "type": "quantitative", "title": "Perceived technical performance (1 to 7)", "scale": {"domain": [1, 7]}} }, "layer": [ {"mark": {"type": "point", "filled": true, "size": 120}, "encoding": {"shape": {"field": "type", "type": "nominal", "title": null}, "color": {"field": "type", "type": "nominal", "title": null}}}, {"mark": {"type": "text", "dy": -12, "fontSize": 11}, "encoding": {"text": {"field": "name", "type": "nominal"}}} ] } ``` **Distances to ideal points** (Euclidean, on the 1 to 7 scales). Excel, with a brand's coordinates in `B2:C2` and the ideal point in `F2:G2`: `=SQRT((B2-$F$2)^2+(C2-$G$2)^2)`. | Brand | To S1 ideal (3.0, 4.2) | To S2 ideal (4.6, 6.3) | To S4 ideal (5.6, 6.5) | |---|---|---|---| | Northfield | **1.12** | 1.96 | 2.58 | | Rival A | 3.67 | 1.63 | **0.78** | | Rival B | 1.48 | 4.10 | 4.88 | | Rival C | 2.44 | **0.81** | 1.08 | | Rival D | 2.60 | 3.20 | 3.31 | | Northfield trail sub-brand, target (4.5, 5.9) | 2.27 | **0.41** | 1.25 | Limits: two attributes rarely capture all of choice; perceptions are averages that hide spread within a segment; and a short distance does not mean preference if a must-have attribute (for example, availability in the target's channel) is missing from the map. ## Targeting strategies | Strategy | What it means | When it fits | Risk | |---|---|---|---| | Undifferentiated (mass) | One offer for the whole market | Needs are similar; scale economies dominate | Rivals pick off segments with better-fitted offers | | Differentiated | A separate offer and mix for each of several segments | Firm has resources and segments differ clearly | Cost and complexity; brand stretch | | Concentrated (niche) | Focus on one segment, serve it very well | Limited resources; a segment rivals underserve | Dependence on one segment | | Micromarketing (local or individual) | Tailor to locations or individuals, often with data and personalisation | Rich customer data, digital channels | Privacy rules and cost; personalisation that feels intrusive | Targeting also has an ethical side: some segments (children, financially vulnerable buyers) call for extra care in what is offered and how. Check local rules on marketing to minors and on the use of personal data before targeting on sensitive variables. ```mermaid flowchart TD A["Define the market and the decision"] --> B["Segment: needs and behaviour first"] B --> C{"Segments pass the five tests?"} C -- "No" --> B C -- "Yes" --> D["Profile segments with demographics and media"] D --> E["Score attractiveness and firm fit"] E --> F["Size the profit pool per segment"] F --> G["Map competitors and ideal points"] G --> H{"Can we win a clear position?"} H -- "No" --> E H -- "Yes" --> I["Choose targeting strategy"] I --> J["Write the positioning statement"] J --> K["Design the marketing mix to deliver it"] ``` ## Positioning statement A positioning statement is an internal document that guides product, price, channel and communication choices; it is not advertising copy. Its parts: | Part | Question | Northfield trail sub-brand *(Example)* | |---|---|---| | Target | For whom, in which circumstance? | Trail runners who train on weekday evenings and race on weekends | | Frame of reference | Compared with what? Which category or alternative? | Running packs and layers | | Point of difference | Why choose us over the alternatives? | The lightest kit that still survives a full season of daily use | | Reason to believe | Why should the target believe it? | Field-tested by Northfield's running club, two-year repair guarantee | | Points of parity | What must we match to be considered at all? | Fit range, breathable fabrics, trail-shoe compatibility | Written out: "For trail runners who train on weekday evenings, the Northfield trail range is the running pack and layer system that stays the lightest through a full season of daily use, because every product is tested by our running club and repaired free for two years." Test it against three questions: Is it relevant to the target? Is it distinctive versus the nearest rival on the map? Is it deliverable and believable given the firm's capabilities? Then check that every element of the marketing mix supports it (`mba/mba-marketing-mix-card`). ## Jobs to be done Christensen, Hall, Dillon and Duncan (2016) argue that customers do not buy products because of their attributes or their demographic profile; they "hire" a product to make progress in a specific circumstance, and "fire" it when something does the job better. The job has functional, emotional and social dimensions. The lens matters for STP in three ways: 1. **Segments by circumstance.** "Runs after work with 45 minutes and no locker" is a circumstance that defines needs better than "aged 25 to 34". 2. **Competition redefined.** For that job, Northfield competes not only with other packs but with running without a pack, with a waist belt, or with a gym membership. 3. **Positioning on progress.** The point of difference becomes the progress the customer makes (getting out the door faster), which is easier to communicate and harder to copy than a feature list. | Job interview prompt | What it reveals | |---|---| | When did you first realise you needed something different? | The trigger circumstance | | What did you use before, and what was wrong with it? | The product being fired, the real competition | | What almost stopped you from switching? | Anxieties and habits to overcome | | What does "better" look like a month later? | The progress that defines success | ## Worked example B (half solved): re-weighting for a growth strategy Northfield's board asks for a growth-focused view: growth weighted 0.30, size 0.10, competitive intensity 0.10; margin 0.20, fit 0.20 and reachability 0.10 unchanged. Use the same segment scores as in Worked example A. 1. Check the weights sum to 1: $0.10 + 0.30 + 0.20 + 0.10 + 0.20 + 0.10 =$ [ ]. 2. S1: $0.10 \times 5 + 0.30 \times 2 + 0.20 \times 2 + 0.10 \times 2 + 0.20 \times 4 + 0.10 \times 5 = 3.00$. 3. S2: $0.10 \times 2 + 0.30 \times 5 + 0.20 \times 4 + 0.10 \times 3 + 0.20 \times 3 + 0.10 \times 4 =$ [ ]. 4. S3: [ ] (show the six products). 5. S4: $0.20 + 0.90 + 1.00 + 0.30 + 1.00 + 0.30 =$ [ ]. 6. New ranking: [ ]. Does the recommendation of Worked example A change, and why does the perceptual map now matter less or more? ## Exercise C (unsolved): profit-focused weights The finance team proposes weights: size 0.25, growth 0.10, margin potential 0.25, competitive intensity 0.10, fit 0.20, reachability 0.10, with the scores of Worked example A. 1. Compute the four weighted scores with the Excel formula. 2. Which segment ranks first and which second? How far apart are the top two? 3. Rival A announces a lower-priced line aimed at S4. Which score changes, by how much would you change it, and does that change the ranking? 4. Write a one-sentence positioning statement for the segment you would target, and name one point of parity. ## Connections to other cards - **Customer lifetime value** (`mba/mba-customer-lifetime-value-card`): add expected CLV per segment as a criterion, or replace "margin potential" with it when data allow. - **Marketing mix** (`mba/mba-marketing-mix-card`): the mix delivers the positioning; inconsistency between them is the classic failure. - **Pricing** (`mba/mba-pricing-card`): price is a positioning signal; willingness to pay often differs by segment. - **Five forces and competitive advantage** (`mba/mba-five-forces-card`, `mba/mba-competitive-advantage-card`): segment competitive intensity and the sustainability of the point of difference. - **Marketing guide** (`mba/mba-marketing-guide`): STP in the full course sequence and the Northfield mini-case. - **Statistics** (`academic/stats-reliability-factor-analysis`): building attitude scales before clustering. ## Common mistakes and misconceptions - **Segmenting by demographics only.** Groups that look different on age or income may respond identically to marketing. Start from needs, benefits or behaviour. - **Choosing the target from the score alone.** Scoring hides competitive position; check the map and the profit pool (Worked example A changes its answer because of the map). - **Tuning weights to the favourite answer.** Fix criteria and weights before scoring, and run a sensitivity check. - **Scoring "competitive intensity" the wrong way round.** Every criterion must be scored so that 5 is good. - **"Everyone is our target."** That is undifferentiated targeting by default, not a strategy. - **Positioning on attributes the target does not value.** A point of difference must be relevant first, distinctive second. - **Forgetting points of parity.** A brand that is different but fails a must-have is not considered at all. - **Confusing the positioning statement with a slogan.** The statement guides internal decisions; advertising translates it. - **Perceptual maps without ideal points.** They show where brands are, not where demand is. - **Static STP.** Segments drift, new rivals arrive and ideal points move; repeat the research on a fixed cycle. ## Self-test questions 1. Name the five criteria a useful segment must meet. 2. Why are needs-based or behavioural bases usually preferred over demographic bases for defining segments? 3. Write the weighted attractiveness formula and the Excel formula for one segment. 4. In Worked example A, why does the team not target S4 despite its top score? 5. Name the four targeting strategies and one situation where each fits. 6. What are the parts of a positioning statement? 7. What is a point of parity, and why does it matter? 8. On a perceptual map, what does an ideal point add? 9. How does the jobs to be done lens change who counts as a competitor? Give an example. 10. Two segments have scores of 3.40 and 3.35. What should you do before choosing? ## My notes and next steps | Item | My entry | |---|---| | Confidence with STP (1 = lost, 5 = could teach it) | [ ] | | Market and decision I am applying STP to | [ ] | | My target segment and positioning statement draft | [ ] | | Mistakes logged in `mba/mba-error-log` | [Date and short description] | | Next review date (spacing: +2 days, +1 week, +1 month) | YYYY-MM-DD | | Next card to study | [mba/mba-marketing-mix-card / mba/mba-customer-lifetime-value-card] | ## Sources and further reading - Smith, W. R. (1956). Product differentiation and market segmentation as alternative marketing strategies. *Journal of Marketing*, 21(1), 3-8. - Ries, A., and Trout, J. (1981). *Positioning: The Battle for Your Mind*. McGraw-Hill. - Christensen, C. M., Hall, T., Dillon, K., and Duncan, D. S. (2016). Know your customers' "jobs to be done". *Harvard Business Review*, 94(9). See also their book *Competing Against Luck* (HarperBusiness, 2016). - Levitt, T. (1960). Marketing myopia. *Harvard Business Review*, 38(4), 45-56. - Further reading (by name only): Kotler and Keller, *Marketing Management*; Keller, *Strategic Brand Management*; Wedel and Kamakura, *Market Segmentation: Conceptual and Methodological Foundations*; OpenStax, *Principles of Marketing* (free, CC BY-NC-SA 4.0, openstax.org). ## Answer key **Worked example B.** (1) 1.00. (3) S2: $0.20 + 1.50 + 0.80 + 0.30 + 0.60 + 0.40 = 3.80$. (4) S3: $0.40 + 0.90 + 0.60 + 0.10 + 0.40 + 0.40 = 2.80$. (5) S4: 3.70. (6) S2 (3.80), S4 (3.70), S1 (3.00), S3 (2.80). The recommendation does not change; it is now supported by the score as well as by the map. The map matters as much as before: S4 is still close behind, and Rival A's strong position there is what separates the two. **Exercise C.** (1) S1: $1.25 + 0.20 + 0.50 + 0.20 + 0.80 + 0.50 = 3.45$; S2: $0.50 + 0.50 + 1.00 + 0.30 + 0.60 + 0.40 = 3.30$; S3: $1.00 + 0.30 + 0.75 + 0.10 + 0.40 + 0.40 = 2.95$; S4: $0.50 + 0.30 + 1.25 + 0.30 + 1.00 + 0.30 = 3.65$ (`=SUMPRODUCT($B$2:$G$2,B3:G3)`). (2) S4 first (3.65), S1 second (3.45), 0.20 apart; S2 drops to third (3.30) because size counts more and growth less. (3) S4's competitive intensity score falls (for example from 3 to 2), which lowers S4 by 0.10 to 3.55; S4 still ranks first on the score, but the price move also threatens S4 margin potential, and with Rival A already closest to the S4 ideal point the case for S4 weakens. A good answer re-scores, then returns to the map and the profit pool. (4) Answers vary; check the statement names one target, a frame of reference, a relevant and distinctive point of difference, and a reason to believe, plus a point of parity such as fit range. **Self-test.** 1. Measurable, substantial, accessible, differentiable (responds differently), actionable. 2. They group customers by what drives response to marketing; demographic groups often contain people with different needs and the same needs across different demographics. Demographics are then used to describe and reach segments. 3. $A_s = \sum_c w_c x_{s,c}$ with weights summing to 1; `=SUMPRODUCT($B$2:$G$2,B3:G3)`. 4. Rival A already sits near the S4 ideal point (0.78) and Northfield is far away (2.58); S2 has no dominant rival and a sub-brand could get closer than anyone (0.41). 5. Undifferentiated (similar needs, scale matters), differentiated (resources and distinct segments), concentrated (limited resources, underserved niche), micromarketing (rich data, digital channels). 6. Target, frame of reference, point of difference, reason to believe (plus points of parity). 7. An attribute the brand must match to be considered; failing it removes the brand from the choice set whatever its point of difference. 8. Where a segment wants a brand to be, so gaps and crowding can be judged against demand. 9. Competitors are anything hired for the same job: a commuter wanting to arrive fresh competes with e-bikes, showers at work and public transport, not only with other jackets. 10. Treat it as a tie: run a sensitivity check on weights and scores, and decide on the profit pool, competitive position and strategic fit. ## Revision history | Version | Date | Author | Change summary | |---|---|---|---| | 0.1 | YYYY-MM-DD | [Your name] | First draft from the template | | 0.2 | YYYY-MM-DD | [Your name] | *Example:* Replaced Northfield data with class case, added CLV criterion | ## Standard and licence note Based on the published segmentation and positioning literature (Smith 1956; Ries and Trout 1981; Christensen, Hall, Dillon and Duncan 2016) and standard MBA marketing practice; no single standard governs STP. The explanations, worked examples, data, brand names and layout are original and fictional; no textbook text, published case or exam question is reproduced. The template is not affiliated with or endorsed by any business school or publisher. Check your own course materials for the frameworks and terminology they require. Template licence: MIT.