Illustration of a segmentation circle
Consider Ben&Jerry's ice cream.
The market is ice cream, in particular packaged ice cream, and we will not consider ice cream or soft serve restaurants as direct substitutes for packaged ice cream.
Although a focus market could be defined, say premium ice cream, this would confine the analysis to that category and preclude Ben&Jerry's from trying to sell ice cream to all price categories. So in this example there is no focus market.
The question becomes: What market coverage strategy should Ben&Jerry's use to cover the ice cream market? To answer this question, you must ask how the ice cream market can be segmented.
Draw a segmentation circle for the ice cream market. Then show segments based on segmentation variables. We can use age (adults and children), benefits sought (regular, low fat, organic) and price sensitivity (low, medium, high).
Be sure to check that the variables pass the "test." For example, income is not a good way to segment the ice cream market since even premium ice cream is not that expensive relative to regular-priced ice cream. An ice cream brand for high-income consumers does not make sense. Note that price sensitivity is not the same thing as income levels.
What this shows is that, based on three segmentation variables (age, benefits sought and price sensitivity), any company could choose to concentrate on a segment or ignore segmentation variables and offer one brand or multiple brands.
The next step is to choose a market coverage strategy. For Ben&Jerry's they chose differentiated; they cover the whole ice cream market with three brands: Ben&Jerry's, Ben&Jerry's Light and Ben&Jerry's Organic.
It follows from the choice of market coverage strategy that Ben&Jerry's has three target markets.
Other examples include: