Segmentation and Targeting

Overview

Disaggregating customer markets, selecting the best option, and positioning for success.

Presented by:
Larry Vincent,
Professor of the Practice
of Marketing
Presented to:
GSBA 509
September 15, 2026

Scenario Estimates

Mean SOM Estimates
Scenario Estimate
A: Surveillance 10.7 mil ($24.7)
B: Dronerienteering 32.0 mil ($105.2)

Outiers Removed

SOM Estimates
Scenario Estimate
A: Surveillance 3.4 mil ($2.0)
B: Dronerienteering 1.7 mil ($1.8)

Let’s go to Starbucks

Starbucks

Recent performance

Customer challenges brewing

While waiting for his order, Mr. Tutunjian watches impatiently as baristas whip up Iced Brown Sugar Oatmilk Shaken Espressos or other foamy, iced, caramel-topped drinks for drive-through or mobile-app orders. Minutes tick by before he is finally handed his coffee (dark-roast coffee with a shot of espresso).

Green Apron Project

  • $500M investment in additional labor hours - increased staffing, larger rosters, better peak coverage
  • SmartQ technology - advanced ordering sequencing algorithm for consistent, timely service across all channels (cafe, mobile, drive-thru)
  • “Five Key Moments” focused on craft and connection - personal touches, barista ownership, customer relationships
  • More store-level ownership and coffeehouse walks to ensure quality

The Third Place

Rethinking the stores

Store Visits

What job do you hire Starbucks to do?

The way you define the job and the customer that hires it matters.

Same Product. Different Jobs for Different Customers.

Source: Sunil Gupta, “Segmentation and Targeting,” HBS 2019.

Segmentation

Why segmentation?

  • Tailor offerings to specific customers
  • Focus marketing resources more efficiently

Segmentation Goal

Transform a heterogeneous population of customers into more homogeneous sub-groupings with similar needs.

Segmentation

Segmentation

Ways to segment

What makes a good segmentation?

  • Measurable
  • Accessible
  • Substantial
  • Differentiable
  • Actionable

Dog Food

Source: Sunil Gupta, “Segmentation and Targeting,” HBS 2019.

Behavioral segmentation: dividing customers by behavior with the firm.

Behavioral metrics

  • User status–new/first-time user, returning user, potential user, regular, etc.
  • Usage rate–light, medium, heavy, extreme
  • Buyer readiness–unaware, informed, interested, intender, etc.
  • Loyalty status–multi-brand, monogamouos, variety-seeker, etc.
  • Occasions–personal vs. business, seasonality, etc.
  • Social behavior–refers customers, promotes products, generates ideas for offerings, etc.

The most common behavioral metrics

  • Recency–How long has it been since the customer last transacted with the firm?
  • Frequency–How often does the customer transact with the firm?
  • Monetary Value–how much profit has the customer generated in their lifetime with the firm?

Targeting

Targeting

Targeting

Targeting

Targeting

Considerations

  • Number of customers in segment vs. economic potential
  • Ability to reach segments and cost of doing so
  • Intensity of competition within segment
  • Satisfaction
  • Forecasted growth
  • Barriers to entry