Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services.
A product focusing on a specific target market contrasts sharply with one following the marketing strategy of mass marketing.
Defining A Target Market
Defining a target market requires market segmentation, the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics.
The market segmentation process includes:
- Determining the characteristics of segments in the target market. Then separating these segments in the market based on these characteristics.
- Checking to see whether any of these market segments are large enough to support the organization’s product. If not, the organization must return to step one (or review its product to see if it’s viable).
- Once a target market is chosen, the organization can develop its marketing strategy to target this market.
Evaluating the Market Segments
- Segment Size and Growth: Does the potential segment have the right size & growth characteristics
- Segment Structural Attractiveness: The company has to appraise the impact on long-run profitability of five groups: industry, competitors, potential entrants, substitutes, buyers & suppliers.
- Threat of intense segment rivalry: a segment is unattractive if it already contains a number of strong or aggressive competitors.
- Threat of new entrants: a segment is unattractive if it is likely to attract new competitors who will bring in new capacity, substantial resources & drive for market share growth.
- Threat of substitute products: a segment is unattractive if there exists actual or potential substitutes for the product & this place a limit on the potential prices & profits.
- Threat of growing bargaining power of buyers: a segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers’ bargaining power grows when they become more concentrated or organised, when the product represents a significant fraction of the buyers’ cost, when the product is undifferentiated when the buyers are price sensitive.
- Threat of growing bargaining power of suppliers: a segment is unattractive if the company’s supplier-raw materials, equipments etc.- are able to raise prices or reduce the quality or quantity of ordered goods or services.
3.Company’s Objectives & Resources-
The company needs to consider its own objectives & resources in relation to that segment could be dismissed because they do not mesh with the company’s long term objectives. Even if the segment fits the company’s objectives, the company must consider whether it possesses the requisite skills & resources to succeed in that segment.
Selecting the Market Segment-
- undifferentiated Marketing: the firm might ignore market segment differences & go after the whole market with one market offer. It focuses on what is common in the needs of buyers. It relies on mass distribution & mass advertising.
- differentiated marketing: marketer identifies different market segments & designs a separate market offer for each segment. Here the sales & costs both are high.
- concentrated marketing: instead of going for a smaller share of a larger market the marketer goes for a larger share of one or more smaller groups.
- micro-marketing: it is tailoring the marketing program according to location &/or individual customer needs & wants. National works won’t work in the local market.
Targeting strategy or targeting is the selection of the customers you wish to service. The decisions involved in targeting strategy include:
- which segments to targeting
- how many products to offer
- which products to offer in which segments
There are three steps to targeting:
- market segmentation
- target choice
- product positioning
Targeting strategy decisions are influenced by:
- market maturity
- diversity of buyers’ needs and preferences
- strength of the competition
- the volume of sales required for profitability
Targeting can be selective (eg.: focus strategy, market specialization strategy or niche strategy), or extensive (eg.: full coverage, mass marketing, or product specialization).
