Market targeting is the decision about which segments a company will serve. Kotler and Armstrong define it as evaluating each market segment's attractiveness and selecting one or more segments to enter.

It is the point in a marketing strategy where the company commits. Segmentation describes what is in the market and commits to nothing. Targeting decides what the company will do about it, and the answer reaches the product roadmap, the hiring plan and what the sales team is equipped to sell.

Most B2B companies never make the decision out loud. They serve whoever arrives, and the segments they operate in are the accumulated result of which deals happened to close.

What Targeting Commits

Entering a segment is expensive in ways that do not appear in a marketing budget. The product has to do what those buyers need. Someone has to build the proof that it does, which usually means reference customers in that segment. The sales team has to understand how those buyers buy and who signs. Support has to handle their questions. Pricing has to work at the size of company they are.

A company that claims six target segments and has built none of that for four of them is not serving six segments. It is serving two and advertising to six.

Michael Porter wrote that the essence of strategy is choosing what not to do. Targeting is where that applies inside marketing. The segments a company rules out are what pay for the segments it keeps, because the budget, the roadmap and the sales capacity are finite.

How to Evaluate a Segment

Kotler and Armstrong set out three things to look at: segment size and growth, segment structural attractiveness, and the company's own objectives and resources.

Size and growth. How many companies are in the segment, what they spend on the category, and whether that is rising or falling. Large and growing is not automatically right. A large growing segment attracts well-funded competitors, and a smaller segment that nobody is serving properly can be worth more to a company that can serve it.

Structural attractiveness. Who else is competing for the segment and how strong they are, how easily buyers can switch, how much power those buyers have over price, and whether substitutes are getting better. A segment dominated by one entrenched supplier with long contracts is hard to win regardless of how large it is.

Company objectives and resources. Whether serving the segment moves the company towards what it is trying to become, and whether it can actually do it. This is the test that kills most attractive-looking segments. Enterprise buyers in regulated industries are a large segment with real budget, and serving them requires certifications, security review capacity and an implementation team that a small company does not have.

Two more factors matter in B2B and are worth adding. The first is current share: a segment where the company already wins is cheaper to grow in than one where it starts from nothing. The second is the pull between segments, where winning a reference customer in one segment makes the next segment easier to enter, because buyers in adjacent segments watch each other.

Four Ways to Cover a Market

Kotler and Armstrong describe four market coverage strategies.

Undifferentiated marketing targets the whole market with one offer, working from what buyers have in common rather than what separates them. In B2B this fits categories where the need really is common across buyers, such as basic infrastructure or commodity supply.

Differentiated marketing targets several segments with a separate offer designed for each. This is what most B2B companies say they do. Doing it properly means separate propositions, separate proof and often separate product configurations, which is why the claim is more common than the practice.

Concentrated marketing goes after a large share of one segment or a few small ones. Kotler and Armstrong note that it suits companies with limited resources. The discomfort comes when a large segment is visible and unserved and the company does not yet have what it would take to serve it.

Micromarketing tailors products and programmes to specific locations or individual customers. Account-based marketing is the B2B version. It works where individual accounts are large enough to justify the cost of treating them individually, and it is expensive applied anywhere else.

Deciding What Not to Serve

Naming the segments the company will not pursue is part of the same decision, and it is the part that gets skipped, because excluding a segment sounds like giving up revenue.

What it actually does is free the budget, the roadmap and the sales team for the segments that were chosen. A company that will not say which segments are out has not chosen, and its marketing will spread across all of them at a level too thin to register in any.

Exclusion is also reversible, which is worth saying to whoever resists it. A segment ruled out this year can be entered next year once the product supports it. The decision is about where the company competes now, with what it currently has.

Targeting a Segment Is Not Narrowing Your Brand Advertising

Targeting decides which segments the company serves. It does not decide that all of the company's advertising should reach only those segments, and treating the two as the same question is a common and expensive mistake in B2B.

Les Binet and Peter Field separate brand building from sales activation. Sales activation, which includes lead generation, asks a buyer to respond now, and Binet and Field write that it should be tightly targeted on buyers who are ready to respond. Brand building has to reach people before they come to market, and it needs much broader reach. Binet and Field had fewer than 50 B2B cases, and they call their findings tentative.

Use the target segments to decide where the product, the sales team and lead generation go. Aim brand advertising at every company the business serves now or could serve later, as far as the budget allows. That includes the buyers who will not buy for two years, the people on the buying committee who do not hold the budget, and the companies currently using a competitor.

Research published in Quantitative Marketing and Economics in 2023 found that bought third-party audience segments reach the people they claim to far less often than marketers assume, and Binet and Field's analysis of B2B cases in the IPA Databank found reach strategies more effective than either acquisition or loyalty strategies. The hub article sets out that evidence in full.

An ideal customer profile belongs on the targeting side. It tells sales which accounts to pursue and tells the product team what has to be built. Using it to decide who sees brand advertising applies a sales tool to a media question.

How to Tell Whether the Decision Has Been Made

Can anyone name a segment the company is not pursuing? If nobody can, the targeting decision has not been made, whatever the strategy deck says.

Does the product roadmap match the target segments? If the roadmap is building for a segment marketing is not targeting, or marketing is targeting a segment the roadmap ignores, two parts of the company have chosen differently.

Can sales walk away from a deal? A targeting decision that nobody enforces at the point of a signable contract is a preference. If deals outside the target segments are still worked and still counted, the company targets everything.

Is there proof in each target segment? A segment with no reference customer, no case study and no demonstration built for it has been named rather than entered.

Sources

• Philip Kotler and Gary Armstrong, Principles of Marketing. Source of the definition of market targeting, the three factors for evaluating market segments, and the four market coverage strategies: undifferentiated, differentiated, concentrated and micromarketing.
• Michael E. Porter, "What Is Strategy?", Harvard Business Review, November and December 1996. Source of the observation that the essence of strategy is choosing what not to do.
• Nico Neumann, Catherine E. Tucker, Kumar Subramanyam and John Marshall, "Is first- or third-party audience data more effective for reaching the 'right' customers? The case of IT decision-makers", Quantitative Marketing and Economics, 2023.
• Les Binet and Peter Field, "The 5 Principles of Growth in B2B Marketing: Empirical Observations on B2B Effectiveness", published by the LinkedIn B2B Institute, drawing on fewer than 50 B2B cases in the IPA Databank from 1998 to 2018. Source of the distinction between tightly targeted sales activation and broad-reach brand building, and of the finding that reach strategies were more effective than acquisition or loyalty strategies.