Market Research, Segmentation & Targeting
- Distinguish primary from secondary market research
- Explain market segmentation and common bases for dividing a market
- Apply the segmentation, targeting, and positioning (STP) process
Market research: primary and secondary
Market research is the systematic gathering of information about customers, competitors, and market conditions to guide decisions. Primary research collects new, first-hand data through surveys, interviews, focus groups, and observation — tailored but costly and slow. Secondary research uses existing data — government statistics, industry reports, published studies — which is cheaper and faster but not customized to the firm’s exact question. Most firms use both: secondary research to map the landscape, primary research to answer specific questions.
Segmentation: dividing the market
No product appeals to everyone, so firms practice market segmentation — dividing a broad market into smaller groups with shared characteristics. Common bases include demographic (age, income, education), geographic (region, climate, urban vs. rural), psychographic (values, lifestyle, personality), and behavioral (usage rate, brand loyalty, benefits sought). Effective segments are measurable, reachable, and large enough to be profitable.
The STP process
Segmentation feeds a three-step strategy called STP: Segment the market into groups, Target the specific segment(s) the firm can best serve profitably, and Position the product so the target perceives it as distinct and valuable relative to competitors. The chosen target market then drives the 4 Ps — everything from product features to promotion is tailored to that group. Positioning is often captured in a concise statement of what the brand stands for in the customer’s mind.
A startup plans to launch a $12 reusable water bottle aimed at environmentally conscious college students. Walk through how it would apply the STP process.
- 1.Segment: divide consumers using bases such as age (students), psychographics (values sustainability), and behavior (uses reusable products) — this defines meaningful groups.
- 2.Target: select the segment the firm can best serve — environmentally conscious college students — because it is reachable on campuses and shares a clear need.
- 3.Position: craft the product’s image as the affordable, stylish, eco-friendly bottle for students, distinct from cheap disposables and pricey premium brands.
- 4.Align the 4 Ps: product (durable, stylish), price ($12, student-friendly), place (campus stores, online), promotion (social media, sustainability messaging) — all tuned to the target.
A company hires a firm to conduct in-depth interviews and surveys with its own potential customers. This is an example of:
Remember the order of STP: you must Segment before you can Target, and you must target before you can Position. Each step narrows the focus, ending with a clear message aimed at one well-defined group.
Dividing a market based on customers’ values, lifestyle, and personality is which type of segmentation?
When a prompt describes a target customer, name the segmentation base being used (demographic, geographic, psychographic, or behavioral). Then explain how that target should shape the 4 Ps — linking segmentation to the marketing mix is a common two-part question.
Answer the 2 checkpoints as you read.
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