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A business model to prioritise segments or new ideas

General Electric together with McKinsey are credited with developing the first directional policy matrix in the 1970s. It is a tool to help focus on products or segments that are attractive to your company and where you have a strong competitive position.

The tool has two axes as illustrated below. In the example, two segments are obvious for focus – traditionalists and quality fanatics. There appears to be opportunities for “delivery buyers” if the company can improve its competitive advantage. The opportunities for company with price fighters and range buyers do not bode well unless something changes to make the segments more attractive and improve the companies competitive advantage.  Unless these changes are possible, these segments will be deselected.

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Segmentation is at the heart of any marketing strategy as it enables a company to more successfully meet the needs of customers and so satisfy them. Also, it is of great benefit to the company supplying the products and services as it is able to group customers together to meet their needs rather than treat them as individuals. As a result, the supplier benefits from greater efficiencies as well as gaining a competitive advantage by supplying groups of customers in a way that could give it a competitive advantage. Marketers find the Directional Policy Matrix an essential business framework for guiding their segmentation strategy. 

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