Targeting strategies · M05 · Sunflower Intelligence

Before you start

You will be able to

Distinguish undifferentiated, differentiated and concentrated marketing and micromarketing (local and individual), and classify a business’s targeting strategy.
Choose a targeting strategy from the company’s resources, how variable its product and market are, the product’s life-cycle stage and competitors’ strategies.
Calculate the incremental contribution of an offer for a new segment after cannibalisation, and the cannibalisation rate at which it breaks even.
Build a buyer persona from segment data, stating the base and the share of the segment each line describes.
Explain the limits of personas and of micromarketing, and target responsibly when personal data are involved.

Review first

Evaluating segments — The scorecard ranked Lantern’s segments; this lesson decides how many of them to serve and how.
Profiling segments — A persona is built from the segment profiles: indexes, means and cross-tabs.
The product life cycle — The life-cycle stage of a product is one of the considerations in choosing a strategy.
Conditional sums, counts and averages — COUNTIFS checks how many members of a segment match a persona’s lines.

Fictional case A fictional coffee business founded by Ana Lim. It starts as a catering and barista-training service, opens its own cafés and an online shop for beans, and plans a canned cold brew.

The idea

Fictional case

The previous lesson’s scorecard put Craft and local first and Explorers second. Cold Brew complicates the choice. Of the 640 respondents, 187 (29.2%) would definitely or probably buy it, a top-two-box score: 50 of the 109 in Craft and local (45.9%), but also 56 of the 146 in On the go (38.4%), a segment that fits Lantern badly (fourth of five on fit) and that Corner Cup already serves. On the go holds more of Cold Brew’s likely buyers than any other segment. Should Lantern concentrate on the drinkers who love what it does, or chase the convenience buyers too?

A targeting strategy answers two questions at once: how many segments will the company serve, and how differently will it treat them? The answers range from one offer for the whole market to an offer for every customer. OpenStax’s Principles of Marketing describes four broad strategies, and Kotler and Armstrong’s textbook the same four, splitting the last into local and individual marketing.

Four targeting strategies. Circles are segments (filled = served); boxes are marketing mixes. Micromarketing works inside a segment, shaping the offer for small places or single customers.

Undifferentiated (mass) marketing

Undifferentiated marketing, the mass marketing of module 1, treats the market as one group and uses, in OpenStax’s words, “a single marketing mix for the entire market”. Its strength is cost: one product, one campaign and long production runs give economies of scale. It makes sense when customers’ differences are weak or don’t affect what they buy. Its weakness is that it leaves every segment open to a rival that serves it better.

For Lantern Cold Brew a mass approach would mean one can, one message and every channel for everyone. The average intent of 29.2% hides a range from 10.5% in Value routine to 45.9% in Craft and local, and spending to persuade Value routine would be spending on the people least likely to buy.

Differentiated marketing

Differentiated marketing targets two or more segments with a separate offer or mix for each, often under separate brands. It can win more of the market than one offer can, and a company present in several segments is less exposed when one of them declines or a rival attacks it. The price is cost and complexity: every extra mix needs its own product version, channels, messages and management, and sales one offer wins may be taken from another. Serving more segments than the company can afford to treat differently is the targeting form of module 1’s over-segmentation. Don’t confuse it with M01’s differentiation, which is about standing out from rivals in ways customers value: differentiated marketing means several segments with several mixes, and a firm can do either without the other.

Concentrated (niche) marketing

Concentrated marketing serves one segment with one mix and aims, in OpenStax’s description, to “own” it. A niche is a narrower group still, with distinctive needs that larger firms serve poorly: the small firm hopes to be a big fish in a small pond. Concentration suits companies whose resources would be stretched thin across several segments, and it builds deep knowledge of the customers it serves. Its risk, as the BCcampus textbook puts it, is having all the eggs in one basket: if the segment shrinks, or a large rival moves in, there is nothing to fall back on. It is how a firm carries out M01’s focus strategy, serving one narrow segment better than broad competitors.

Micromarketing: places and people

Micromarketing shapes offers for small local areas or for individual customers. Local marketing adapts the offer to a city, a neighbourhood or a single store; individual marketing adapts it to one customer, usually from data about what that customer has bought or said. OpenStax describes micromarketing as going beyond the niche to target specific individuals within it from the information collected about them. Lantern already has the raw material for both: its own cafés, each with its own neighbourhood, and an online shop that records what each customer buys.

In depth

Choosing a strategy

Kotler and Armstrong’s textbooks list five considerations for choosing among the strategies: the company’s resources, how variable the product is, the product’s life-cycle stage, how variable the market is, and competitors’ strategies (the labels as listed in M. L. Ripley’s course notes on their Marketing: An Introduction). The notes give only the labels, so the middle column below is the usual reading of each, not a quotation. For the life-cycle stage it follows M02’s life-cycle lesson, where a new product starts with one basic version, and OpenStax’s chapter on the life cycle, where firms in maturity extend a product to new customers and alter it to fit them. None of the five decides alone.

Five considerations, the usual reading of each, and Lantern Cold Brew
Consideration	The usual reading	Lantern Cold Brew
Company resources	Limited resources favour concentration	A small firm planning one new product, with a launch budget, not a national brand’s
Product variability	Uniform products (salt, fuel) suit mass marketing; products that can vary suit segmenting	Coffee varies in taste, strength, format and provenance
Life-cycle stage	A new product often launches in one basic version, to everyone or to one segment; separate versions for separate segments become common in maturity	Cold Brew is planned for later in 2027 and will start in its introduction stage; awareness of Lantern is 13.9%
Market variability	Buyers who want the same things suit mass marketing; buyers who differ suit segmenting	Five segments whose Cold Brew intent ranges from about 10% to 46%
Competitors’ strategies	Segmenting rivals make mass marketing risky; rivals who ignore a segment leave room in it	Summit Brew, Daily Grind RTD and Arcadia Coffee already sit at different points of the market

For Lantern, resources point to concentration; the life-cycle stage allows either one mix for everyone or one target; and product variability, market variability and competitors’ strategies point away from mass marketing. Together they favour one focused offer at launch. That still leaves the question of which segments the offer is for, and whether a second offer should follow.

Serving more than one segment

Two segments can sometimes share one offer. Whether they can depends on how close their needs are. Module 2 summarised each segment by its segment centre, and the distance between two centres, in standardised units, says how different two segments’ needs are. Craft and local’s nearest neighbour is Explorers (2.39); On the go is far away (4.51), almost as far as Value routine (4.68).

Three segments’ needs as indexes against the average respondent (100 = average)
Need	Craft and local	Explorers	On the go
Local and independent	168	104	68
Taste and quality	136	107	90
Novelty	124	158	87
Sustainability	123	95	75
Convenience	76	92	137
Energy	78	102	147
Price	67	88	99

Craft and local and Explorers both care more than average about taste and novelty, so a craft cold brew with interesting single origins could speak to both with one product and one message. On the go wants the opposite of Craft and local on almost every line: convenience and a caffeine kick, not local provenance. Serving it well would take a second mix, available where it buys on the move and promoted on different benefits.

On the go buys mostly in supermarkets or ready-to-drink (39%), at the office or from vending machines (30%) and at cafés (21%). The survey doesn’t separate convenience stores from supermarkets. M02’s plan put the cans in supermarkets and M04’s research kept them to a test in a few stores, so some of On the go will meet them there whatever Lantern targets.

A second mix carries a cost beyond money. One brand can’t easily stand for “craft, local and worth the walk” and “strong, everywhere, grab it and go” at once: each message weakens the other in customers’ minds. Companies that serve distant segments well often use separate brands for them, which costs more again. Module 4 shows how to read this on a perceptual map.

Cannibalisation

Cannibalisation is the sales a new offer takes from the company’s own existing offers rather than from rivals or from people who would have bought nothing; M02’s product-decisions lesson met it in passing. The cannibalisation rate is the share of the new offer’s sales that come from the company’s existing offers. A new offer is worth adding only if its incremental contribution, its own contribution minus the contribution it takes from the old offers and minus any extra fixed costs, is positive.

Cannibalisation hurts most when the new offer is cheaper or earns a thinner margin than the one it replaces, as when a premium brand launches a budget version. It can still be the right move: a company that doesn’t cannibalise its own product may leave a rival to do it. Estimate the rate before launch by asking prospective buyers what they would have bought instead, and measure it after launch from the customers who switch, as M02’s idea of incrementality requires.

For Lantern the risk runs through its cafés. A Craft and local regular who would have bought a café cold brew and buys a can in one of the test supermarkets instead would earn Lantern $1.63 (M02’s figures: $3.49 less the 32% the distributor and retailer keep and the $0.74 it costs to make and deliver a can), not the margin on a café drink. The study didn’t ask what Cold Brew would replace, so the rate is unknown; a question for Lantern’s next survey.

Buyer personas

A segment is a table of averages, which is hard to keep in mind when designing a menu, writing an advertisement or training staff. A buyer persona turns the table into a short profile written as if about one person. OpenStax calls it a “semi-fictional representation of an ideal customer”. The software designer Alan Cooper popularised personas in his 1999 book The Inmates Are Running the Asylum, and John Pruitt and Jonathan Grudin (2003), describing their use at Microsoft, insisted that personas be built on data: early ones failed partly because they were designed by committee rather than from research.

Built from segment data, a persona takes each line from a number and says which number. A practical order:

State what it stands for. The segment’s name, its size (respondents and share) and its share of spending: a persona without its base hides how many people it describes.
Needs first. The highest and lowest values of the segment’s index against the average on each need: what it cares about more, and less, than the average customer. In a needs-based segmentation these define the segment.
Behaviour. How much and how often they buy, and where, with the median beside any mean that a few heavy buyers pull up.
Who they are, as shares. The demographic and regional lines from the cross-tabs, each as the share of the segment it describes (“76% aged 30–59”), not as a fact about the persona (“44 years old”).
The company and them. Awareness, past purchase, loyalty and intent: where the brand starts with this segment.
A name and a quote. The name is a label to make the persona easy to discuss; the quote, if any, comes from a real interview. Neither is a finding.

The card below follows that order for Craft and local. Every figure is an average or a share of the segment’s 109 respondents.

Persona: Quinn, the neighbourhood regular: a label for Craft and local, not a finding.
Stands for: 109 of 640 respondents (17.0%) and 25.9% of the study’s coffee spend. Needs study, May 2027 (opt-in panel with quotas on age band, so shares describe respondents).
What matters: Index against the average respondent (100 = average): local and independent 168, taste and quality 136, novelty 124, sustainability 123. Less than average: convenience 76, price 67.
How they buy: 8.4 cups a week on average (median 7); $76.61 a month on average (median $68); 61% buy mostly at a café, 28% mostly brew at home.
Who they are: Shares of the segment: 76% aged 30–59; 78% with household income over $80k; 47% live as a couple; 38% live in Central Harbour City.
Lantern and them: 25% know Lantern and 14% bought it last year; local loyalty 3.94 of 5 (all respondents 3.05); 46% would definitely or probably buy Cold Brew; nearest rival Arcadia Coffee.
Quote: Take one from a real interview with a member of the segment (M04). Don’t write one.

What a persona can’t do

A persona describes the segment’s averages and most common answers, and almost nobody is average on everything. Of the 109 Craft and local respondents, only 5 match these five of the card’s lines at once: aged 30–59, income over $80k, mostly buying at a café, living in Central and in a couple. Make each line the single most common answer instead (four demographic lines and the main source: 45–59, $80k–120k, café, Central, couple) and only 1 of the 109 matches; with the other, almost equally common age band (30–44, 41 members against 42) it is 3. A persona drawn as one 52-year-old with a precise income describes almost no one in its own segment.

The demographic lines do lean the segment’s way: 78% of members have household incomes over $80k against 34% of other respondents, and 61% against 26% buy mostly at a café. Together, though, they describe almost no one: 5 members match all five. The needs line covers most of the segment and few outside it: 84 of the 109 rate both taste and local provenance 6 or 7 out of 7, against 4 of the other 531 respondents. That is module 1’s caution about demographics in another form: they describe who, the needs describe why.

Stereotypes. A face, a gender and an age invite assumptions the data never made. Pruitt and Grudin note that personas need not be extreme or stereotyped; a neutral name and shares rather than a single age help.
No size. A persona is one person; the segment is 109 respondents standing for a share of every coffee drinker in the city. Keep the base on the card.
Staleness. Needs and channels change. Date the persona and rebuild it when the segmentation is refreshed.
Invention. Hobbies, a job title, a favourite podcast: details the survey didn’t measure make a persona vivid and wrong. Leave them out or mark them as hypotheses to research.

Targeting responsibly when data are personal

Micromarketing runs on personal data: purchase histories, locations, what people click. The BCcampus textbook flags the ethical and privacy concerns of microtargeting, which isolates very specific groups from detailed personal data. Collecting more than the offer needs, using data for purposes customers weren’t told about, or inferring sensitive traits from behaviour all break the trust that individual marketing depends on, and in many places the law. B01 covered the legal basics.

Targeting can also harm by exclusion. OpenStax describes an advertising platform that let advertisers exclude people from seeing advertisements by race, religion or gender, and which the US Department of Housing and Urban Development sued, citing laws against discrimination in housing. Personas can do the same quietly, if a team designs only for the persona’s demographics and treats everyone else as out of scope. The ethical screen of the previous lesson (product harm and consumer vulnerability) applies to each campaign and channel, not only to the choice of segment.

Formulas

Incremental contribution of a new offer after cannibalisation

\Delta C = Q \times m_{\text{new}} - c \times Q \times m_{\text{old}} - F

$\Delta C$: Incremental contribution: what the new offer adds to the company’s total contribution$ per period
$Q$: Units (or customers) of the new offer sold in the periodunits
$m_{\text{new}}$: Contribution per unit of the new offer$ per unit
$c$: Cannibalisation rate: the share of the new offer’s sales that would otherwise have been sales of the existing offer
$m_{\text{old}}$: Contribution per unit of the existing offer that is lost$ per unit
$F$: Extra fixed costs of running the new offer in the period$ per period

Assumes. Each cannibalised unit of the new offer replaces one unit of the old one. If one new unit replaces a different number of old units, multiply by that number.

Contribution per unit is price received minus variable cost (M02). With F = 0 the formula is Q × (m_new − c × m_old).

Break-even cannibalisation rate

c^{*} = \dfrac{Q \times m_{\text{new}} - F}{Q \times m_{\text{old}}}

$c^{*}$: The cannibalisation rate at which the new offer adds nothing; above it, the offer loses money for the company as a whole
$Q$: Units of the new offer soldunits
$m_{\text{new}},\ m_{\text{old}}$: Contribution per unit of the new and the existing offer$ per unit
$F$: Extra fixed costs of the new offer$ per period

Assumes. As for the incremental contribution. With no extra fixed costs, c* = m_new ÷ m_old.

Compare c* with the best estimate of the actual rate: the wider the gap, the safer the launch.

Worked examples

A first example: Does a gym chain’s budget brand add anything?

Fictional figures

Quarrystone Fitness runs premium clubs; each member-month contributes $40 after variable costs. It plans a budget brand for price-sensitive exercisers, which would contribute $14 a member-month, and expects 3,000 budget members. Its survey suggests that 20% of them would be existing premium members moving down. What does the budget brand add each month, and at what cannibalisation rate would it add nothing?

Contribution from the budget members (the incremental-contribution formula, first term): $3{,}000 \times 14 = 42{,}000$ dollars a month.
Contribution lost from premium members who move down: $0.2 \times 3{,}000 = 600$ members, each taking $40 with them: $600 \times 40 = 24{,}000$ dollars.
Incremental contribution: $42{,}000 - 24{,}000 = 18{,}000$ dollars a month (no extra fixed costs are given).
Break-even rate (no fixed costs): $c^{*} = 14 \div 40 = 0.35$ , or 35%.

Answer. About $18,000 a month, and the brand adds nothing if 35% or more of its members are premium members trading down.

What it means. The new brand earns $42,000 but adds only $18,000, because a fifth of its members bring a $40 margin down to $14. The survey’s 20% is an estimate; if the true rate were nearer 35%, the brand would be pointless for the chain as a whole. Quarrystone should keep the two brands clearly apart (different locations, no premium features) to keep the rate down.

A harder example: A bookshop’s subscription box for a new segment

Fictional figures

Ferrisby Books has served adult readers from one shop. It plans a monthly young-adult subscription box for teenage readers, its first offer for a second segment. Each box contributes $9; packing staff and software add $4,000 a month of fixed costs; it expects 1,200 subscribers. 30% of subscribers are thought to be families who would otherwise have bought young-adult books in the shop, where each such family contributes $6 a month. Find the box’s incremental contribution, the break-even cannibalisation rate, and the number of subscribers it needs at the expected rate.

Incremental contribution (the formula with fixed costs): $1{,}200 \times 9 - 0.3 \times 1{,}200 \times 6 - 4{,}000 = 10{,}800 - 2{,}160 - 4{,}000 = 4{,}640$ dollars a month.
Break-even cannibalisation rate: $c^{*} = (1{,}200 \times 9 - 4{,}000) \div (1{,}200 \times 6) = 6{,}800 \div 7{,}200 \approx 0.94$ , or about 94%.
Subscribers needed at the expected 30% rate: each subscriber adds $9 - 0.3 \times 6 = 7.20$ dollars net, so the fixed costs need $4{,}000 \div 7.20 \approx 555.6$ , or 556 subscribers.
Judge the risk. Cannibalisation could almost wipe out the box’s contribution before the offer lost money: it is not the danger here. The danger is volume: below about 556 subscribers the fixed costs win. The 1,200 is the estimate to test, with a pre-launch sign-up list.

Answer. About $4,640 a month; it breaks even at a cannibalisation rate of about 94%, and needs at least 556 subscribers at a 30% rate.

What it means. A differentiated move into a second segment is judged on what it adds, after what it takes from the existing business and what it costs to run. Here cannibalisation is a minor issue because the box earns more per subscriber than the shop loses; the fixed costs make volume the real question. With a premium offer cannibalised by a cheaper one, as at Quarrystone, the opposite would hold.

Applied: a business decision: A persona for Craft and local, and how far to trust it

Fictional figures

Ana wants a persona for Craft and local to brief her café managers and the agency designing Cold Brew’s launch. Build it from the needs study (module 2’s profile and the respondents’ answers) and test it against the 109 members.

State what it stands for: 109 of 640 respondents (17.0%) and 25.9% of the study’s coffee spend.
Needs, from the indexes: local and independent 168, taste and quality 136, novelty 124, sustainability 123; less interest than average in price (67) and convenience (76).
Behaviour: 8.4 cups a week on average but a median of 7; $76.61 a month on average, median $68; 61% buy mostly at a café and 28% brew at home.
Who they are, as shares: 76% aged 30–59 (41 aged 30–44 and 42 aged 45–59, too close to name one band), 78% with household income over $80k, 47% couples, 38% in Central. Lantern: 25% know it, 14% bought it last year, local loyalty 3.94 against 3.05, Cold Brew intent 46%.
Test it. A COUNTIFS over the 109 members finds 5 who match the four demographic lines and the café habit together, and 1 to 3 who match the most common answer on each of the five, depending on which age band is taken as most common. The needs line, taste and local both rated 6 or 7, fits 84 of them (77%).

Answer. The persona card above: needs and behaviour that describe most of the segment, demographic lines given as shares, a label for a name and no invented details.

What it means. Ana’s briefing should lead with the needs (what 77% of the segment share) and present the demographics as the shares they are. A brief that says “design for a couple in their fifties in Central, earning $80k–120k and drinking at cafés” would design for 1 of the 109 (3 with the other age band). The persona keeps the segment in view; the segment’s tables, with their bases, stay the evidence.

Applied: a business decision: Concentrate, or chase On the go with Cold Brew?

Fictional figures

Ana must choose Cold Brew’s targeting strategy for its launch. She has the scorecard (Craft and local first, Explorers second), the Cold Brew intent by segment, the segments’ needs and M02’s economics: at $3.49 a can Lantern would earn $1.63 a can through supermarkets, $1.42 through natural grocers, $1.35 through convenience stores and $2.30 in its own cafés and online shop.

Where the likely buyers are: 56 of the 187 top-two-box answers come from On the go (30%), 50 from Craft and local (27%) and 31 from Explorers (17%). Mindful holds 34 (18%) and Value routine 16 (9%). Craft and local and Explorers together hold 43%.
Can one offer serve them? Craft and local and Explorers are neighbours (centres 2.39 apart) and share a taste for quality and novelty. On the go is 4.51 from Craft and local and wants convenience and energy, Lantern’s weak points.
What On the go would cost: a second mix in convenience stores and offices, where Lantern would earn $1.35 a can against $1.63 in supermarkets; a message about energy and availability that pulls against Lantern’s craft position; and Corner Cup already 0.57 from the segment’s ideal on the map.
Resources (a small firm, a launch budget, low awareness) favour one focused offer at launch, and a new product in its introduction stage usually starts with one basic version.

Answer. Launch Cold Brew with one mix aimed at Craft and local and Explorers as one combined target, sold through Lantern’s cafés and online shop and natural grocers, with the supermarket test M04 planned, and treat On the go as a later, separate decision. Strictly, this is neither concentrated marketing (one segment) nor differentiated marketing (a mix for each segment): two neighbouring segments share one offer, which works because their centres are only 2.39 apart and both care about taste and novelty.

What it means. The launch is designed around 43% of the likely buyers; the other 57%, including On the go’s 30% (the largest single group) and Mindful’s 18%, are not its target, though some will buy in the test supermarkets or in Lantern’s own channel. Top-two intent also overstates buying: it is a stated preference, and answering “probably” costs nothing (M04). In return Lantern gets a coherent launch it can afford, to be revisited with evidence: sales by channel in the first months, and a test in a few convenience stores to see whether On the go buys a craft can at all. Positioning Cold Brew against Summit Brew, the brand nearest Explorers’ ideal, is the work of module 4.

Explore

Common mistakes

“Serving more segments always sells more, so differentiated beats concentrated.”
Each extra segment needs its own mix, which costs money and management, and some of its sales are taken from the offers you already have. A company should serve as many segments as it can serve well and profitably, which for a small firm with a new product is often one.
“A niche is a safe place for a small firm.”
A niche protects a firm from broad competitors only while it stays too small or too specialised to attract them, and it puts all the eggs in one basket. Watch the niche’s size and the larger firms’ moves, and know what you would do if either changed.
“The new segment’s sales are all extra.”
Some come from your own customers switching. Subtract the contribution they take with them (the cannibalisation rate times the old margin) and any new fixed costs before judging the offer.
“A persona is a creative-writing exercise.”
A persona is a summary of data given a label. Every line should trace to a number about the segment; invented hobbies, jobs and quotes make it vivid and wrong.
“The persona is our typical customer.”
Averages describe almost no one: only 1 to 3 of Craft and local’s 109 members match the segment’s most common answer on five lines (four demographic and the main source), depending on the age band. Write demographic lines as shares, lead with the needs that most members share, and keep the base on the card.
“Micromarketing is just using more data.”
It uses personal data, which brings consent, purpose and privacy obligations, and it can exclude people as easily as it includes them. Collect what the offer needs, tell customers how it is used, and check who the targeting leaves out.

Guided practice

Work through these with hints when you need them. Every hint and every worked solution is there to be used.

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On your own

No hints this time. Answer, check, and read the feedback; the solution appears once you have answered or if you ask for it. Your first answers count toward mastery.

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In practice

Targeting decisions are rarely made once. A company launches with the strategy its resources allow, measures what happens, and widens or narrows its targets as evidence arrives. The professional habit is to write down, with the strategy, what would change it.

Fictional case

Ana’s plan for Cold Brew’s first year aims one mix, with one craft message, at Craft and local and Explorers as a single combined target, sold through Lantern’s cafés and online shop and natural grocers, with the supermarket test M04 planned. The persona briefs the café managers and the agency, needs first. Her two triggers for revisiting the choice: if convenience stores near Central offices sell a test batch at a steady rate, On the go may be worth a separate mix; if Cold Brew sold in grocers and the test supermarkets takes visible sales from Lantern’s cafés (her next survey will ask café regulars what Cold Brew replaces), the channels need rethinking before anything is added. Both are fictional plans for this lesson.

The same reasoning runs through very different businesses. A regional bank may concentrate on small manufacturers it understands, then add a separate offer for start-ups with its own staff and brand. A travel company may use local marketing, with different brochures for each departure city, inside a concentrated strategy aimed at retired couples. A software firm may personalise every customer’s onboarding (individual marketing) while selling one product to one industry.

In each case the strategy is judged by three questions this lesson has given you: can the company afford every offer it plans, does each new offer add more than it takes from the others, and does the team designing for the target know who the target really is, from data rather than imagination?

Knowledge check

Six questions, one attempt each, no hints. Score 80% or more to complete the lesson; you can take it again at any time.

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Summary

A targeting strategy decides how many segments to serve and how differently: undifferentiated (one mix for all), differentiated (a mix per segment), concentrated (one segment or niche) or micromarketing (local and individual).
Choose with five considerations: resources, product variability, life-cycle stage, market variability and competitors’ strategies; for a small firm launching a new product they usually favour concentration.
Segments whose needs are close can share an offer; distant ones need separate mixes, which cost more and can blur the brand.
Judge a new offer by its incremental contribution, Q × m_new − c × Q × m_old − F; it breaks even at c* = (Q × m_new − F) ÷ (Q × m_old).
A buyer persona is segment data given a label: state its base, lead with needs, give demographics as shares, and invent nothing.
Personas describe averages that fit few real members, can carry stereotypes and go stale; micromarketing raises privacy and exclusion risks.

Key formulas

Incremental contribution of a new offer after cannibalisation
Break-even cannibalisation rate

Terms introduced

Targeting strategy: A company’s choice of how many segments to serve and how differently to treat them: undifferentiated, differentiated or concentrated marketing, or micromarketing.
Differentiated marketing: Targeting two or more segments with a separate offer or marketing mix for each; also called segmented or multi-segment marketing.
Concentrated marketing: Targeting one segment or niche with one marketing mix, aiming for a large share of it; also called niche marketing.
Niche: A narrowly defined group of customers, usually within a segment, whose distinctive needs larger competitors serve poorly.
Micromarketing: Tailoring offers and marketing to small local areas (local marketing) or to individual customers (individual marketing), usually with detailed customer data.
Local marketing: Adapting offers and marketing to the customers of a particular city, neighbourhood or store.
Individual marketing: Adapting offers and marketing to a single customer, usually from data on what that customer has bought or said; also called one-to-one marketing.
Cannibalisation: Sales a new offer takes from the same company’s existing offers, rather than from rivals or from people who would otherwise have bought nothing.
Cannibalisation rate: The share of a new offer’s sales that would otherwise have been sales of the company’s existing offers.
Incremental contribution: The change in a company’s total contribution caused by a decision: the new offer’s contribution minus the contribution it takes from existing offers and any extra fixed costs.
Buyer persona: A short profile of a typical member of a target segment, written as if about one person but built from research data on the segment, used to keep the segment’s needs in view in decisions.

Sources

Gomez Albrecht, M., Green, M. & Hoffman, L. (2023). Principles of Marketing, section 5.5, “Selecting Target Markets”. OpenStax. Undifferentiated, differentiated and concentrated marketing, micromarketing, and buyer personas as a semi-fictional representation of an ideal customer. openstax.org/books/principles-marketing/pages/5-5-selecting-…
Principles of Marketing – H5P Edition (2022), section 5.3, “Selecting Target Markets and Target-Market Strategies”. BCcampus, CC BY-NC-SA 4.0. Mass, multisegment, concentrated and niche marketing, and microtargeting’s privacy concerns. opentextbc.ca/principlesofmarketingh5p/chapter/selecting-tar…
Kotler, P. & Armstrong, G. (2018). Principles of Marketing, 17th ed., chapter 7. Pearson. The book was not consulted; its sections on undifferentiated, differentiated and concentrated marketing, micromarketing (local and individual) and choosing a targeting strategy were confirmed from the book’s table of contents as listed on O’Reilly Learning. oreilly.com/library/view/principles-of-marketing/97801344925…
Ripley, M. L. Course notes on chapter 7 of Armstrong and Kotler, Marketing: An Introduction, “Factors to consider in choosing a target-marketing strategy”. York University. The source for the five considerations’ labels; the notes list them without explanation. yorku.ca/lripley/imUsegment.htm
Gomez Albrecht, M., Green, M. & Hoffman, L. (2023). Principles of Marketing, section 9.4, “Marketing Strategies at Each Stage of the Product Life Cycle”. OpenStax. Maturity strategies of extending a product to new customers and altering it to fit the market. openstax.org/books/principles-marketing/pages/9-4-marketing-…
Pruitt, J. & Grudin, J. (2003). Personas: practice and theory. Proceedings of the 2003 Conference on Designing for User Experiences (DUX). Microsoft Research. Cooper’s 1999 book as the source that popularised personas; personas built on data; their risks. microsoft.com/en-us/research/publication/personas-practice-t…
Gomez Albrecht, M., Green, M. & Hoffman, L. (2023). Principles of Marketing, section 5.7, “Ethical Concerns and Target Marketing”. OpenStax. Exclusion through advertising platforms. openstax.org/books/principles-marketing/pages/5-7-ethical-co…

Before you start

You will be able to

Review first

The idea

Undifferentiated (mass) marketing

Differentiated marketing

Concentrated (niche) marketing

Micromarketing: places and people

In depth

Choosing a strategy

Serving more than one segment

Cannibalisation

Buyer personas

What a persona can’t do

Targeting responsibly when data are personal

Formulas

Incremental contribution of a new offer after cannibalisation

Break-even cannibalisation rate

Worked examples

Explore

Common mistakes

“Serving more segments always sells more, so differentiated beats concentrated.”

“A niche is a safe place for a small firm.”

“The new segment’s sales are all extra.”

“A persona is a creative-writing exercise.”

“The persona is our typical customer.”

“Micromarketing is just using more data.”

Guided practice

On your own

In practice

Knowledge check

Summary

Key formulas

Terms introduced

Sources