Kellogg on Marketing, 3rd Edition

CHAPTER 9Defining Customer Segments: Four Steps for Successful Market Segmentation

Kent Grayson

Three activities are fundamental for developing a winning marketing strategy: segmentation, targeting, and positioning (STP). Segmentation is the process of dividing your customer market into different groups. Targeting is the process of choosing which segment or segments you will focus on. Positioning is the process of deciding what general approach is most likely to convince customers in your target segment to switch from their current solution to your product or service. Good STP decisions are important for marketing success, whether you are developing a strategy for an existing product or service or for a new one.

The previous chapter focused on targeting, and explained why the marketing strategy for a product or service should focus on only a subset of customers in a market, rather than on most or all of the customers. As that chapter pointed out, a product or service will be successful only to the extent that it is perfect for a specific group of customers (or at least more perfect than the competition). Why does being perfect require you to focus on only a subset of customers? Because customers in any market are heterogeneous—their preferences differ from one another. As a result, a product that is perfect for some customers is almost certain to be imperfect for others. Imperfect products create dissatisfied customers, which makes life harder for you and makes it easier for ...