The Difference Between Segmentation and Targeting, and How to Proceed

"I want to divide customers well and define my aim, but the difference between segmentation and targeting is fuzzy" — this is a common stumbling block when building a marketing strategy. The two are often spoken of as a set, but their roles are clearly different. This article lays out, in plain terms, the meaning of and difference between segmentation and targeting, the concrete way to proceed, and the perspective of co-creation marketing that lies beyond them.

What Is Segmentation?

Segmentation (market subdivision) means dividing the entire market into groups (segments) that share common needs or features. Rather than lumping an undifferentiated mass together, it is best understood as a process of organizing the market into a state where you can see "what kind of customer has what kind of needs."

When dividing the market, four axes (variables) are mainly used.

• Geographic variables: Region, climate, population density, urban vs. suburban, and so on.
• Demographic variables: Age, gender, occupation, income, family structure, and so on.
• Psychographic variables: Values, lifestyle, personality, hobbies and preferences, and so on.
• Behavioral variables: Purchase frequency, usage status, benefits sought, loyalty, and so on.

What Is Targeting?

Targeting means selecting, from the segments divided by segmentation, the promising group your company should pursue. It is the crux of strategy, deciding where to concentrate limited resources.

When choosing the segment to pursue, an evaluation framework called the "6Rs" is often used. You assess whether a market is truly worth pursuing through views such as market scale (Realistic Scale), growth (Rate of growth), competition (Rival), priority (Rank), reachability (Reach), and measurability (Response).

There are also three types of how targeting engages with the market.

• Undifferentiated: Regardless of segment differences, the same appeal is made to the whole market (mass marketing).
• Differentiated: A different appeal is prepared for each of several segments.
• Concentrated: Resources are concentrated on one specific (or a few) segment (a niche strategy).

The Difference Between Segmentation and Targeting

In a word, the difference is this: segmentation is the work of "dividing the market," while targeting is the work of "choosing from what has been divided." If segmentation is the "map-making" that organizes the overall picture of the market, targeting is the "choice of destination" — deciding where to head on that map.

In other words, targeting only works once segmentation exists. It is not a matter of which is superior; what matters is treating them as a continuous process in the order of segmentation → targeting. Adding positioning to these two gives "STP," the fundamental framework of marketing strategy.

How to Proceed with Segmentation and Targeting

When you actually carry out segmentation and targeting, the following steps make it easier to organize.

1. Clarify the objective: Define the goal first — why you are dividing the market. If the objective is vague, the way you divide will also drift.
2. Choose axes and divide into segments: From geographic, demographic, psychographic, behavioral, and other variables, choose axes suited to your objective and group the market.
3. Evaluate each segment: Using views such as the 6Rs, compare each segment's scale, growth, competition, reachability, and so on.
4. Select the target to pursue: Based on the evaluation, decide which segment to pursue, and with which type — undifferentiated, differentiated, or concentrated.
5. Make the customer image concrete with a persona: Distill the chosen target into a persona — a figure with a pseudonym, age, interests, and challenges — and align understanding across the team.

Proceeding in this order means you don't end at "divided it somehow"; instead, the customer you should pursue and the appeal directed at them become clear.

Beyond That: The Perspective of Co-Creation Marketing

Segmentation and targeting are fundamentally a one-way approach from company to customer, in which the company "divides and selects" customers and designs the appeal. By contrast, the idea drawing attention in recent years is co-creation marketing.

Co-creation marketing is the idea of a company and its customers (consumers) collaborating to create products, services, and value together. Its hallmark is involving the customer not merely as a "target of the appeal" but as a "partner who creates value together."

What matters here is that co-creation marketing and segmentation/targeting are not opposed. To determine with whom to co-create value, you first need to understand customers deeply through segmentation and targeting. Precisely because the target to pursue is clear, co-creation marketing that involves that customer can take shape. Build the foundation with STP, then collaborate with customers beyond it. Keeping this developmental flow in mind makes the place of segmentation and targeting all the clearer.

Summary

Segmentation is the work of "dividing the market," and targeting is the work of "choosing the aim from what has been divided." The two are continuous in the order of segmentation → targeting, and together with positioning they form the foundation of strategy known as STP. When proceeding, the basic flow is to define the objective, choose axes, evaluate each segment with frameworks like the 6Rs, select the target to pursue, and distill it into a persona. Beyond that lies a developmental form, co-creation marketing, in which customers become partners who create value together. First understanding customers deeply through segmentation and targeting is the starting point for every marketing initiative.