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Evidence · Strategy

Segmentation, targeting and positioning: what the evidence says

The evidence is divided. Studies of real buying find that competing brands sell to much the same kinds of people, so segments tend to describe the category rather than one brand, and field tests of narrow targeting show returns that are often weak or depend on conditions. Segmentation remains useful for understanding buyers and implementing strategy, and positioning on benefits tends to work better than positioning on features, though no single position wins on every measure.

Definition

Segmentation, targeting and positioning (STP) is the textbook sequence for marketing strategy: divide a market into groups of buyers with different needs or responses, choose which groups to serve, and decide how the brand should be seen relative to competitors by those groups. It assumes that brands build partly protected segments of distinct customers. A rival view, the market-based assets theory, holds that brands compete for the same pool of category buyers and differ mainly in how many of them they reach and how easily they come to mind.

What the research finds

Rival brands' buyers look alike

When the buyers of competing brands in the same category are compared, their profiles are largely the same; buying is mostly unsegmented, and competing brands share their buyers in line with their size. Whether a category splits into submarkets should therefore be tested, by checking whether the products grouped together really are the ones most affected by each other's moves, rather than assumed.[1][2]

The laws of brand competition clash with STP

Big and small brands differ greatly in how many buyers they have but much less in how loyal those buyers are, a pattern that holds across competitive repeat-purchase markets. Researchers argue that this and related regularities conflict with the idea of protected segments. For 55 leading packaged-goods brands, the number of buyers roughly doubled from a quarter to a year and roughly doubled again over several years, so the market a brand must reach is much larger than its regular customers.[3][1][4]

Precise targeting often underdelivers

In a field experiment by an online travel firm, retargeted ads showing the exact products people had viewed were on average less effective than generic brand ads, except when browsing suggested the person's preferences had become specific. In two field experiments on customer churn, the customers at highest risk of leaving were not the best targets; targeting by responsiveness to the offer worked better. A published critique argued that a widely cited study of psychological targeting succeeded in only two of five tests.[5][6][7]

Data-driven targeting is not worthless

Evidence runs the other way too. Across 3.3 million survey respondents randomly exposed to 9,596 display campaigns, ads became far less effective at changing stated purchase intent after European privacy rules restricted the use of browsing data for targeting. The loss was largest on general-content sites, where other ways of targeting are hard.[8]

Segmentation still earns its place

Reviews argue that segmentation stays a core strategic tool when it is used to understand a market and organise how a firm serves it, and that many practical failures are failures of implementation. Business-to-business segmentation has its own systematic literature, which stresses that the value of a segmentation becomes visible only when it is put into practice.[9][10]

Benefits beat features, but no position wins everywhere

In two consumer studies of real brands, positioning on benefits or on the type of user generally beat positioning on product features for favourability, differentiation and credibility, but no strategy won on all three. In business financial services, the positions most closely linked to customer vulnerability (the risk of losing a customer), such as fees and service, were common across brands, suggesting brands should be distinctive in how they communicate a position rather than chase a unique one.[11][12][13]

In business markets, positioning is a process

Business positioning strategies fall into a small, stable set of types and rest largely on hard criteria such as product quality and on relationships. Case studies of two global industrial firms show positioning as a recurring process across several levels of the organisation. Survey studies of managers link market orientation and positioning to brand performance, and link sustainable positioning to willingness to pay a premium through customer commitment.[14][15][16][17]

How strong is the evidence?

The two sides of this debate rest on different kinds of evidence and rarely test each other directly. The finding that rival brands share the same kinds of buyers comes mainly from one research group and from consumer panel data in repeat-purchase categories. The defence of segmentation rests largely on reviews and conceptual work, and the business-market positioning studies use case studies and manager surveys with self-reported outcomes. Targeting experiments are few and each comes from a single firm or setting, and the critique of psychological targeting is a published letter rather than a new study. A reading consistent with both sides is that segmenting to understand buyers and buying situations fits the evidence, while segmenting to restrict reach is what the buying-pattern studies warn against.

Claims tested against the evidence

References

  1. Byron Sharp, John Dawes, Kirsten Victory (2024). The Market-Based Assets Theory of Brand Competition. Journal of Retailing and Consumer Services.
  2. Glen L. Urban, Philip L. Johnson, John R. Hauser (1984). Testing Competitive Market Structures. Marketing Science.
  3. Andrew S. C. Ehrenberg, Mark D. Uncles, Gerald J. Goodhardt (2004). Understanding Brand Performance Measures: Using Dirichlet Benchmarks. Journal of Business Research.
  4. Charles Graham, Rachel Kennedy (2021). Quantifying the Target Market for Advertisers. Journal of Consumer Behaviour.
  5. Anja Lambrecht, Catherine E. Tucker (2013). When Does Retargeting Work? Information Specificity in Online Advertising. Journal of Marketing Research.
  6. Eva Ascarza (2017). Retention Futility: Targeting High-Risk Customers Might Be Ineffective. Journal of Marketing Research.
  7. Byron Sharp, Nick Danenberg, Steven Bellman (2018). Psychological Targeting (A Critical Comment). PNAS (Proceedings of the National Academy of Sciences).
  8. Avi Goldfarb, Catherine E. Tucker (2010). Privacy Regulation and Online Advertising. Management Science.
  9. Sally Dibb, Lyndon Simkin (2001). Market Segmentation. Industrial Marketing Management.
  10. Roberto Mora Cortez, Ann Højbjerg Clarke, Per Vagn Freytag (2021). B2B market segmentation: A systematic review and research agenda. Journal of Business Research.
  11. Christoph Fuchs, Adamantios Diamantopoulos (2010). Evaluating the effectiveness of brand‐positioning strategies from a consumer perspective. European Journal of Marketing.
  12. Jenni Romaniuk (2001). Brand positioning in financial services: A longitudinal test to find the best brand position. Journal of Financial Services Marketing.
  13. Jenni Romaniuk, Byron Sharp (2000). Using Known Patterns in Image Data to Determine Brand Positioning. International Journal of Market Research.
  14. Stavros P. Kalafatis, Markos H. Tsogas, Charles Blankson (2000). Positioning strategies in business markets. Journal of Business & Industrial Marketing.
  15. Christian Koch, Richard Gyrd‐Jones (2019). Corporate brand positioning in complex industrial firms: Introducing a dynamic, process approach to positioning. Industrial Marketing Management.
  16. Pramod Iyer, Arezoo Davari, Mohammadali Zolfagharian, Audhesh K. Paswan (2018). Market orientation, positioning strategy and brand performance. Industrial Marketing Management.
  17. Riza Casidy, David Sugianto Lie (2023). The effects of B2B sustainable brand positioning on relationship outcomes. Industrial Marketing Management.

Bibliographic details only. Follow the DOI to read each study at its publisher.

Related topics

A synthesis of 17 studies, written by ScholarSignal. Last reviewed 2026-09-26.

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