Market Segmentation vs Market Targeting: What's the Difference?

Market segmentation is the process of dividing an entire market into smaller subgroups based on shared characteristics - industry, company size, demographics, needs, or behavior - creating distinct categories of potential customers rather than treating the market as one undifferentiated whole.

Market targeting is the step that follows segmentation: evaluating those subgroups and deliberately choosing which ones to actually pursue, typically the segments judged most attractive or most profitable for the business, and building a strategy specifically for them.

The two are sequential steps within the broader STP framework - segmentation, targeting, positioning - and each is incomplete without the other. Segmentation on its own is purely descriptive: it organizes the market into categories but makes no judgment about which of those categories are actually worth pursuing, or in what order. Targeting is where the strategic decision actually happens - selecting one or more segments to focus resources on based on size, fit, and competitive opportunity, rather than trying to serve every segment the market happens to divide into. A company that segments carefully but skips deliberate targeting risks spreading its message and resources evenly across every group it identified, even the ones that were never going to be worth pursuing, which is functionally similar to not having segmented the market at all.