4.2 Targeting: Choosing Where to Play

Once you’ve segmented the market into meaningful groups (covered earlier in Chapter 3: Understanding Consumers and Segments), the next step is deciding which segments to pursue. This is called targeting.

isn’t about going broad. It’s about going deep, where you can really win. It’s not picking the biggest group or the trendiest customers. It’s about finding the segment—or segments—where your company can deliver exceptional value and earn a solid return.

How Companies Choose Targets

Marketers typically use five criteria when evaluating potential segments. These criteria help ensure that a segment isn’t just interesting—it’s actually worth going after.

Figure 4.1: Criteria for Effective Segmentation

Criteria	What It Means
Size and Growth	Is the segment large and growing enough to justify the investment?
Structural Attractiveness	How competitive is the segment? Are there high barriers to entry or too many rivals?
Accessibility	Can the company reach and serve this segment effectively?
Profitability	Can the company earn a healthy profit from the segment?
Alignment	Does the segment fit with the company’s strengths, brand image, and long-term goals?

Pro Tip

Sometimes the most attractive-looking segment isn’t the best one for you. A smaller, underserved niche might be a better fit than battling giant competitors in the mainstream market.

Types of Targeting Strategies

Depending on company resources, goals, and market realities, marketers choose from four common targeting strategies.

Strategy	What It Is	Example
Undifferentiated (Mass Marketing)	Same offer to all segments	Walmart’s “Everyday Low Prices”
Differentiated (Segmented Marketing)	Different offers for different segments	Marriott offers budget, mid-scale, and luxury hotel brands
Concentrated (Niche Marketing)	Focus on one or a few small segments	5-hour Energy targets busy adults needing a quick energy boost
Micromarketing (One-to-One)	Tailored products or promotions for individuals or locations	Amazon’s personalized product recommendations

Strategy in Action: Netflix’s Ad-Supported Tier

Why did Netflix expand its targeting?

By 2022, Netflix’s subscriber growth in North America and Europe had slowed dramatically. Competitors like Disney+, HBO Max, and Amazon Prime were eroding market share. At the same time, rising subscription prices were pushing out cost-conscious consumers.

Netflix saw two options:

Continue chasing premium, ad-free subscribers (a segment showing signs of saturation).
Expand the market by offering a lower-cost, ad-supported option.

They chose the second—a differentiated targeting strategy.

Where did Netflix choose to play?

Price-sensitive customers who want entertainment but are unwilling or unable to pay premium subscription prices
New international markets where lower-cost streaming is essential to compete
Younger audiences more comfortable with ad-supported content models (many are already used to YouTube, Spotify Free, and Hulu with ads)

How does Netflix now win with this segment?

Introduced Basic with Ads in late 2022 at a significantly lower price point.
Partnered with Microsoft to manage ad sales and technology—giving Netflix an ad infrastructure quickly without having to build it from scratch.
Used data-driven targeting to minimize disruption: Fewer ads, personalized content suggestions, and tight control over ad relevance.

The outcome:

By early 2024, the ad-supported tier had added over 40 million monthly active users globally.
Advertisers flocked to Netflix, eager to reach younger, diverse audiences in a premium content environment.
Netflix improved average revenue per user (ARPU), especially in markets where premium subscriptions were declining.
The move also opened new geographic segments in Latin America and Asia-Pacific.

And that shift? It changed everything.

Netflix didn’t abandon its core market. It added a new target segment that aligned with shifting consumer behavior, expanded revenue streams, and positioned the company for long-term growth in a competitive, price-sensitive market.

References

Morris, C. (2024, May 16). Netflix advertising is booming: More than 40 million users are now on its ad-supported tier. Fast Company. https://www.fastcompany.com/91126696/netflix-advertising-booming-40-million-users-ad-supported-tierFast Company+1GIGAZINE+1

Chatterjee, S. (2023, August 30). Netflix moves into ad-supported streaming: Cause for concern or a normal transition? Harvard Business Review. https://store.hbr.org/product/netflix-moves-into-ad-supported-streaming-cause-for-concern-or-a-normal-transition/UV8776

AInvest. (2025, April 15). Netflix's hidden growth engine: Why the streaming giant still has room to run. AInvest. https://www.ainvest.com/news/netflix-hidden-growth-engine-streaming-giant-room-run-2504/

Finding Big Ideas that Lead to Sharp Targeting and Positioning

Once you’ve chosen potential segments, the next question is, what can you offer them that’s not just relevant, but remarkable?

That’s where the Five Ways to Finding Big Ideas come in. Targeting isn’t just about picking a group. It’s about finding the big idea that will grab them—and give you a foothold in their minds.

These themes show up again and again in winning competitive angles and positioning statements.

1. Solve Everyday Pain

People buy solutions to problems. The bigger the pain, the stronger the demand for relief.

Case in point: Puj Tub

Bathing a newborn can be stressful and even dangerous in a traditional bathtub. Entrepreneurs Katie and Ben Richardson developed the Puj Tub—a flexible, soft foam infant bath that fits snugly into any sink.

It made bath time safer, easier, and less intimidating for new parents.

Parents snapped it up. Puj Tub had $10 million in sales in its first year, mostly driven by word-of-mouth and online parenting communities.

2. Ride Waves of Interest

Trends = built-in momentum. If you can spot cultural or technological waves early, you can ride them to success.

Case in point: Skullcandy

In the mid-2000s, as smartphones gained popularity, more people sought high-quality headphones with a distinct personality. Skullcandy rode the wave with a “narrow your focus” strategy that catered to lifestyle-driven, expressive buyers. The company offered earbuds and over-ear headphones with bold designs, celebrity tie-ins, and great sound—a sharp contrast to the bland, generic headphones on the market.

By cultivating and responding to their Love group, the company tapped into the rise of personal tech and self-expression. It caught fire. Skullcandy became a $300 million brand and a cultural icon among young, style-conscious consumers.

3. Stretch or Entertain to the Extreme

Sometimes, taking an idea to its logical (or fun) extreme captures attention.

Case in point: 5-hour Energy

While Red Bull and Monster were battling over who had the biggest, flashiest energy drink, 5-hour Energy flipped the script. They stripped out the sugar, calories, and massive cans, instead offering a small, portable shot focused purely on delivering quick, sustained energy. It appealed to busy professionals and students who wanted results without the bulk and sugar crash.

They didn’t just sell energy—they created a new category. 5-hour Energy became the #1 energy shot, generating hundreds of millions in annual sales while creating a new product category.

4. Build on a Core Product

Take something familiar and make it better in a meaningful way.

Case in point: Huggable Hangers

Most people didn’t think much about hangers—until inventor Joy Mangano reimagined them. Her Huggable Hangers were slim, velvet-coated, and prevented clothes from slipping off while saving closet space. She demonstrated the hangers live on QVC and Home Shopping Network, turning a mundane item into a “must-have” for millions.

Turns out, people really do care about hangers. Over 300 million units sold, making Huggable Hangers one of the best-selling home products of all time.

5. Cool Hunting

Look for what’s working in other markets, regions, or industries—and adapt it.

Case in point: Bluetooth sunglasses

Early adopters noticed a growing trend among tech enthusiasts: combining Bluetooth audio with everyday wearables. Startup brands, and later giants like Bose and Amazon, developed Bluetooth-enabled sunglasses that let users stream music and take calls without earbuds.

By blending fashion and function, they appealed to consumers who sought seamless technology without compromising style.

What began as a technical quirk evolved into a cultural staple. A niche concept became a mainstream product category embraced by both techies and fashion-forward consumers.

Locking in a Competitive Angle

Lesson from the trenches: Great angles usually come from asking better questions. Marketers who consistently discover powerful competitive angles don’t just brainstorm, they ask 2–3 probing, open-ended questions whenever they talk to customers, suppliers, or even friends.

The following are some of the most effective broad-focus questions:

What products cause you the most frustration or problems in your life?
What services have recently annoyed or disappointed you?
Of the products or services you use often, which would you rank as “most problematic” or “least problematic”?
What purchases have you regretted the most and why?
What’s the biggest barrier to doing what you want to do right now?
Have you ever thought: “I know it’s not possible yet, but I wish I could [fill in the blank]”? What would that be?

Bonus exploratory questions:

What are some great products that still have annoying little problems?
What bad or frustrating service experiences have you had recently?
What cool or innovative products have you come across while traveling?

Why This Works

By asking these types of questions often, you’ll uncover more ideas than you could possibly develop.

Your goal:

Spot core problems and frustrations customers want solved.
Identify new features or services that could solve those problems.
Explore ways to add fun, coolness, or luxury that competitors overlook.

Pro Tip

Most winning competitive angles either 1) solve a persistent pain point that others ignore or 2) unlock a new positive outcome customers didn’t think was possible.

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