Target markets are the embodiment of the marketing principle of selectivity and concentration. The firm seeks to match its goals and abilities to a particular group or groups of customers.
Target markets should always be chosen so that companies can exploit any competitive advantages and differential advantages that they might have over their competitors.
A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element to a marketing strategy. The marketing mix variables of product, place (distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace.
Learn about:- 1. Meaning of Target Market 2. Concept of Target Market 3. Considerations 4. Factors 5. Steps 6. Aspects 7. How Does the E-Marketing Works to Expand the Target Market?
ADVERTISEMENTS:
8. Types 9. Strategies 10. Evaluation and Selection of Target Market Segment 11. Examples 12. 7 Ps 13. Identifying Market Segments and Target Market Positioning
14. Target Audience 15. Target Marketing and Positioning of Business Marketing.
Target Market: Introduction, Concept, Factors, Steps, Segmentation, Aspects, Types, Strategies and Examples
Contents:
- Meaning of Target Market
- Concept of Target Market
- Considerations of Target Market
- Factors of Target Market
- Steps of Target Market
- Aspects of Target Market
- How Does the E-Marketing Works to Expand the Target Market?
- Types of Target Market
- Strategies of Target Market
- Evaluation and Selection of Target Market Segment
- Examples of Target Market
- Ps of Target Market
- Identifying Market Segments and Target Market Positioning
- Target Audience of Target Market
- Target Marketing and Positioning of Business Marketing
Target Market – Meaning
Target markets are the embodiment of the marketing principle of selectivity and concentration. The firm seeks to match its goals and abilities to a particular group or groups of customers.
ADVERTISEMENTS:
A firm focuses its marketing effort toward the chosen target market, essentially ignoring other possible customers. If people outside the target segment become customers great but unless they have great potential and need of a change in the marketing mix there will be little effort expended toward them.
Target markets should always be chosen so that companies can exploit any competitive advantages and differential advantages that they might have over their competitors.
1. Competitive advantages are any advantage that the company may have that allow it to perform better than the competition.
2. Differential advantages are the special cases where the competitive advantage also results in customers’ preferring the offering of the company over that of its competitors.
ADVERTISEMENTS:
A target market is chosen for the distinct ability of firm/organization to serve the segment better (more profitably) than it can serve other segments.
i. Undifferentiated/Mass Marketing – When a firm produces only one product or product line and promotes it to all customers with a single marketing mix.
ii. Differentiated/Segment Marketing – Choosing one or more target markets/ segments and developing different marketing mixes for each targeted segment.
Note that targeting a particular market must come after market segments have been identified. (You cannot choose unless you have choices.)
ADVERTISEMENTS:
Companies can attempt to differentiate their offering on any attribute that is a perceptible to the customers. A commonly used phrase for a perceptible differentiation between offerings is the just noticeable difference.
iii. Concentrated Marketing (niche marketing) – When a firm commits all of its marketing resources to serve a single market segment.
iv. Micro-marketing – involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household.
The Value Proposition that customer’s perceive for your offering is the answer to their question – What’s in it for me?
ADVERTISEMENTS:
Alternatively stated as, “Why should I pay what you ask for this offering?”
A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element to a marketing strategy. The marketing mix variables of product, place (distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace.
After segmentation of market, next step is targeting. A target market is a group of customers at whom the sellers specifically aims their marketing efforts. It is based on effective segmentation of the market, which provides the marketer to define the segments clearly and from which the marketer can pick one marketing segment that is most appropriate for the organization.
Targeting involves evaluating various segments and selecting how many and which ones to target. In other words, target marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. It can be the key to attracting new business and making the small business’s a success.
ADVERTISEMENTS:
The beauty of target marketing is that it makes the promotion, pricing and distribution of company’s products and/or services easier and more cost-effective. It provides a focus to all of company’s marketing activities.
Target Market – Concept
The new concept of marketing starts from the definition of market targeting. The selection of target market helps the marketer to correctly identify the markets and the group of target customers for whom the products/services are produced. In these days, market targeting is used all over the world. It helps in sub-dividing the market into many segments, and then deciding to offer a suitable product to some selected segments.
Market targeting is the act of evaluating and comparing the identified groups and then selecting one or more of them as the prospects with the highest potential. A marketing mix is devised that will provide the organisation with the best return on sales, by creating the maximum amount of value to customers.
Target marketing includes identifying marketing segments, selecting one or more of them and developing products and marketing mixes tailored to each.
ADVERTISEMENTS:
In this way sellers can develop the right product for each target market and adjust their prices, distribution channels and advertising to reach the target market efficiently. Instead of scattering their marketing efforts they can focus on the buyers who have greater purchase interest.
Market segmentation reveals the firm market segment opportunities. The firm has to evaluate the various segments and decide how many and which ones to target.
Target Market – Considerations
The marketing manager’s pricing decisions are affected by many factors. The most significant of these is demand from the organisation’s target market. Even when price changes are considered in response to a competitor’s change in price, target market considerations are important because the competitor’s move may affect only the competitor’s target market.
In essence, the question the marketing manager faces is this – “Who are our customers and what do they want the price to be?” The notion that the customer wants the lowest price is not always correct. Diamonds and Rolls Royce automobiles are expensive partly because people expect them to be expensive.
A $100 bottle of perfume may contain only $4 top $16 worth of scent; the rest of the price goes to advertising, packaging, distribution, and profit. When consumers buy such perfume, they are buying atmosphere, hope, the feeling of being someone special, and pride in having “the best.”
The common coffee pot can be bought in many models, each with slightly different features. The top-of-the-line model typically sells for perhaps $10 more than the next most expensive model. The top-price model may have a digital timer and buzzer that sound when the coffee is ready.
ADVERTISEMENTS:
The difference between the two in terms of manufacturing costs may be less than $3, but the market segment that wants “the best” seems to be willing to pay $10 for the timer. Even frequently purchased products can exemplify the customer’s willingness to pay a higher price rather than a lower one.
Parents do not usually brag about buying bargain-priced baby food for their infants, nor do most hosts offer their guests a drink while discussing what an inexpensive brand of whiskey they’ve been able to buy. In some demand situations, marketers can expect to sell more at a higher price than at a lower one.
Instead, they offer reasonably priced products that prove popular to target markets. Among the most successful of these marketers is J.C. Penney. For example, Penney’s sells casual polo shirts with its fox brand in place of ralph lauren’s polo player. Its shirts sell for $15 to $20 less than the Ralph Lauren brand. Penney’s insists that the quality of the shirts is identical; only the logo is different.
Penney’s also offers “plain pocket” jeans at substantially less than the price suggested by Levi Strauss for its five-pocket jeans. J.C. Penney’s success with these efforts suggests that the company’s pricing methods are appropriate for the Penney target market. Of course, Ralph Lauren and Levi Strauss also know their target markets.
Target Market – 4 Key Factors that Affect Consumer Preferences and the Size of Target Market
As time passes, the demand for products changes. Firms attempt to be in a position to benefit from a possible increase in demand for particular products. For example, some hotels in Los Angeles and New York have anticipated an increase in Japanese guests and have offered new conveniences to capture that portion of the market.
Common conveniences offered are Japanese translators, rooms with bamboo screens, and a Japanese-language newspaper for these guests.
As consumer preferences change, the size of a particular target market can change. Firms monitor consumer preferences over time to anticipate how the size of their target market may be affected.
The following are key factors that affect consumer preferences and therefore affect the size of the target market:
Factor # 1. Demographics:
The total demand for particular products or services is dependent on the demographics, or characteristics of the human population or specific segments of the population. As demographic conditions change, so does the demand.
For example, demographic statistics show an increase in the number of women who work outside the home. Firms have adjusted their product lines to capitalize on this change. Clothing stores have created more lines of business clothing for women.
Food manufacturers have created easy-to-fix frozen foods to accommodate the busy schedules of wage-earning women. The tendency for people to have less free time and more income has resulted in increased demand for more convenience services, such as quick oil changes and tire replacement services.
One of the most relevant demographic characteristics is age because target markets are sometimes defined by age levels. Demographic statistics show that the population is growing older. Consequently, the popularity of sports cars has declined as customers look for cars that are dependable and safe.
Automobile manufacturers have adjusted to this demographic change by supplying fewer sports cars. Home Depot created an installation service business to capitalize on the growing number of mature customers who prefer not to do repair or installation work themselves.
Although the population has generally grown older, the number of children in the United States has recently increased. Many of these recently born children have two parents who work outside the home and spend large sums of money on their children. Firms such as Oshkosh B’ Gosh and The Gap have capitalized on this trend by producing high-quality (and high-priced) children’s clothing.
To illustrate how characteristics of the population can change over time, consider the changes over the 20-year period 1985-2005. In general, the population has grown larger, while both the number of people age 65 or older and the number of households earning more than $60,000 annually have increased. Such information is relevant to firms because it suggests that the size of specific target markets may be changing over time.
Factor # 2. Geography:
The total demand for a product is also influenced by geography. Firms target snow tires to the northern states and surfboards to the east and west coasts of the United States. Tastes are also influenced by geography. The demand for spicy foods is higher in the southwestern states than in other states.
Factor # 3. Economic:
As economic conditions change, so do consumer preferences. During a recessionary period, the demand for most types of goods declines. Specialty and shopping products are especially sensitive to these conditions. During a recession, firms may promote necessities rather than specialty products.
In addition, their pricing may be more competitive. When the economy becomes stronger, firms have more flexibility to raise prices and may also promote specialty products more than necessities.
Interest rates can also have a major impact on consumer demand. When interest rates are low, consumers are more willing to purchase goods with borrowed money. The demand for products such as automobiles, boats, and homes is especially sensitive to interest rate movements because these products are often purchased with borrowed funds.
Factor # 4. Social Values:
As the social values of consumers change, so do their preferences. For example, the demand for cigarettes and whiskey has declined as consumers have become more aware of the dangers to health from using these products. If a firm producing either of these products anticipates a change in preferences, it can begin to shift its marketing mix.
Alternatively, it could modify its product to capitalize on the trend. For example, it could reduce the alcohol content of its whiskey or the tar and nicotine content of its cigarettes. It may also revise its promotion strategy to inform the public of these changes.
Target Market – 3 Step Process of Targeting Markets
The market selected by a company as the target for their marketing efforts is critical since all subsequent marketing decisions will be directed toward satisfying the needs of these customers. But what approach should be taken to select markets the company will target?
One approach is to target at a very broad level by identifying the market as consisting of qualified customers who have a basic need that must be satisfied. For example, one could consider the beverage market as consisting of all customers that want to purchase liquid refreshment products to solve a thirst need.
While this may be the largest possible market a company could hope for, in reality there are no commercial products that would appeal to everyone in the world since individual nutritional needs, tastes, purchase situations, economic conditions and many other issues lead to differences in what people seek to satisfy their thirst needs.
Because people are different and seek different ways to satisfy their needs, nearly all organizations, whether for profits or not-for-profits, industrial or consumer, domestic or international, must use a market segmentation approach to target marketing. This approach divides broad markets, consisting of customers possessing different characteristics into smaller market segments in which customers are grouped by characteristic shared by others in the segment.
To successful target markets, using a segmentation approach, organizations should engage in the following three step process:
i. Identify segments within the overall market.
ii. Choose the segment(s) that fits best with the organization’s objective and goals.
iii. Develop a marketing strategy that appeals to the selected target market(s).
Step # 1 – Identifying Market Segments:
The first step in targeting markets is to separate customers who make up large general markets into smaller groupings based on selected characteristics or variables (also referred to as bases of segmentation) shared by those in the group. General markets are most often associated with basic product groups, such as – automobile, beverage, footwear, home entertainment etc.
The purpose of segmentation is to look deeper within the general market in order to locate customers with more specific needs within the product group e.g., Seek hybrid automobile who also share similar characteristics e.g., college educated, support environmental issues etc., when grouped together these customers may form a smaller segment of the general market.
The variables used to segment markets can be classified into a three stage hierarchy with higher stages building on information obtained from lower stages in order to reach greater precisions in identifying shared characteristics.
Stage I – Segmentation Variables:
Segmentation Variables Consumer Markets:
i. Demographics (age group, gender, education level, ethnicity, income, social class, marital status)
ii. Geographies (location, climate)
Segmentation Variables Business Markets:
i. Demographics (type, industry, size, age)
ii. Geographies (location, climate)
iii. Business Arrangement (ownership, financial condition).
Stage II – Segmentation Variables:
Information at this stage includes learning what options customers have chosen to satisfy their needs, what circumstances within customers environment could affect how purchases are made and understanding local conditions that could impact purchase decisions.
Segment Variables Consumer Markets:
i. Current Purchasing situation (brands used, purchase frequency, current suppliers)
ii. Purchase ready (possess necessary equipment, property, knowledge & skill sets)
iii. Local Environment (Cultural, Political, Legal)
Segment Variables Business Markets:
i. Current purchasing Situation (brands used, purchase frequency, current suppliers)
ii. Purchase ready (Possess necessary equipment property, knowledge 7 skill sets)
iii. Local Environment (Cultural, Political, legal)
iv. Customers served by business (identify the business markets)
v. Business Perceived Image (Identifying how targeted businesses are perceived by their customers).
Stage III – Segmentation Variables:
Much of what is needed at Stage III is information that is often well protected and not easily shared by customers.
Segment Variables Consumer Markets:
i. Benefits Sought (price, overall value, specific features, ease of use etc.)
ii. Product usage (how used, situation when used etc.)
iii. Purchase conditions (time of day/month/year when purchased, credit terms etc.)
iv. Characteristics of individual buyer (purchase experience, how purchase is made, influences on purchase decision)
v. Psychographics (personality, attitudes, lifestyle)
Segment Variables Business Markets:
i. Benefits sought (price, overall value, services, profit margins etc.)
ii. Product Usage (how used, situation when used etc.)
iii. Purchase Conditions (length of sales cycle, bid pricing, credit terms etc.)
iv. Characteristics of buying center (purchase experience, number of members, make-up of key influencers, willingness to resume risk).
Step # 2 – Choosing Market Segments:
The second step in selecting target markets requires the marketer to critically evaluate the segments identified in step 1 in order to select those which are most attractive.
In determining whether a segment is worthy of being a target market, the marketer needs to address the following questions:
i. Is the segment large enough to support the marketer’s objectives? This is an especially critical question if the marketer is entering a market served by many competitors.
ii. Is the segment showing signs of growth? One of the worst situations for a marketer is to enter a market whose growth is flat or declining, especially if competitors already exist.
iii. Does segment meet the mission of the company? The segment should not extend too far beyond the direction the company has chosen to take.
Once one or more segments have been identified the marketer must choose the most attractive options for their marketing efforts. At this point the choice becomes the firm’s target market.
Step # 3 – Develop Marketing Strategy to Appeal to Target Market:
The results of analyzing market segments leads the marketer to consider one of the following target marketing strategies:
i. Undifferentiated or Mass Marketing.
ii. Differentiated or Segmentation Marketing.
iii. Concentrated or Niche Marketing.
iv. Customized or Micro Marketing.
Target Market – Aspects of Target Market
These aspects are defined below:
1. Evaluation of Segments:
In evaluating market segments a company has to first identify the criteria for evaluation.
The following criteria may be applied to determine the attractiveness of segments:
i. Profitability:
While evaluating segments in rural areas, one should not be impressed by size alone because in rural India, size may be large but purchasing power is limited. So, marketers should considered the cost and profit margin in rural markets.
Relevant information required for profitability includes:
a. Sales volume
b. Distribution cost
c. Promotion cost
d. Sales Revenue
e. Profit margins
ii. Growth Rate:
A segment’s attractiveness depends not only on its current profitability but also future prospects. The growth rate of the segment in terms of growth in population, rise in purchasing power of the products is to be considered.
iii. Company Objective:
Company should evaluate the segment opportunity with reference to their short term and long term objectives. If a company’s objective is to achieve long term sustainable sales volume by expanding its customer’s base, then it has to go rural instead of expecting consumers to come to urban markets for products and services. This has been demonstrated by companies like Asian Paints, HUL and Colgate-Palmolive, who are now reaching rural homes with their products.
iv. Resource Competencies of the Company:
The company should also examine its compatibility with resources and capability to service rural markets. It should take calculated risks small pilot projects, which will provide opportunities to evaluate the target segment behaviour towards products and services. Smart marketers in rural areas like HUL and ITC have initiated “Project Shakti” and “e-Choupal” pilots which have been transformed into rural marketing models.
v. Limitations:
Finally, a company should examine whether the entry into the segment is acceptable to the society and government or not.
vi. Attractiveness:
Marketers should consider the attractiveness of the rural markets. Smaller companies or new companies may lack the skills, experience and resources needed to serve the larger segments. Some segments may be less attractive when there is already more competition.
2. Selection of Segments:
After evaluating the segments according to the above mentioned factors, selection of the segments can be done by rating the alternative segments on a predetermined scale (low, medium, high) with respect to the segment evaluation criteria. Finally, segments can be ranked on the scores obtained, and those with the highest scores can be selected as target segments to enter the rural market.
3. Coverage of Segments:
Companies have three alternative coverage strategies to suit their segmentation which are undifferentiated strategy, differentiated strategy and concentrated strategy.
The marketer’s approach towards strategy selection changes with reference to the state of four variables like company resources, product, variability, product life cycle stage and market variability. For example, Mahindra and Mahindra as well as other tractor companies have adopted a differentiated strategy as these companies have large resources and more product variability.
For instance, undifferentiated strategy is to be chosen, when company resources are moderate, product variability is less, and product is in the introduction stage in the market that has less variability.
Target markets are groups of individuals that are separated by distinguishable and noticeable aspects.
Target markets can be separated by the following aspects:
(i) Geographic segmentations, addresses (their location climate region)
(ii) Demographic/socioeconomic segmentation (gender, age, income, occupation, education, household size, and stage in the family life cycle)
(iii) Psychographic segmentation (similar attitudes, values, and lifestyles)
(iv) Behavioral segmentation (occasions, degree of loyalty)
(v) Product-related segmentation (relationship to a product)
Target Market – How Does the E-Marketing Work to Expand the Target Market?
The term e-marketing refers to the use of the Internet to execute the design, pricing, distribution, and promotion of products. E-marketing is part of e-commerce, which is the use of electronic technology to conduct business transactions, such as selling products and acquiring information about consumers, more efficiently.
In a recent survey of 109 executives, 62 percent said that marketing is the most important component of their e-commerce. Amazon(dot)com’s use of e-marketing to differentiate itself from other book retailers demonstrates the importance of e-marketing. Amazon uses its website to accept orders and payment online from customers anywhere in the United States and delivers the products directly to the customers.
By using the Internet, it offers customers convenience because they can purchase books without going to a store. Thus, Amazon has created a means by which it can reach a much broader target market than if it had simply opened bookstores in various locations, and it is able to offer lower prices by selling direct, without the need for retail outlets.
Amazon has also personalized the website for each customer depending on what books the customer recently ordered. Thus, its “store- is structured to highlight the books that will fit the particular customer’s interests.
Other retailers have noticed the popularity of ordering books online and have developed their own online systems to complement their “bricks and mortar” stores. In this way, they have also extended their target markets.
Many firms that sell clothing, office supplies, travel services, electronic equipment, and many other products are using e-marketing to reach a larger target market. Marriott International has an efficient website that helps match its hotels with travelers’ interests.
Southwest Airlines has an effective website that accepts online orders. It receives more than 30 percent of its revenue from online orders. UPS has developed a very efficient website that allows customers to track packages.
The brokerage firm Charles Schwab has set up a website to receive orders to buy or sell stocks or other securities. More than 80 percent of its orders are conducted online.
The Internet also enables firms to target foreign markets. By establishing a foreign-language website that can accept orders and allow customers to pay by credit card, a firm can sell its products in foreign countries.
It does not need to establish an office or hire employees in a foreign country to conduct this type of business. It can rely on its existing facilities to produce the products, use its website to market the product and accept payment, and deliver its product to the foreign customers via mail services.
In addition to allowing firms to receive orders at lower costs and to expand their target markets, e-marketing can enhance a firm’s distribution and its promotion of products.
Target Market – 3 Types of Target Markets (With Short Term and Long Term Market Segments)
The types of target market are as follows:
1. Concentrated marketing
2. Undifferentiated marketing, and
3. Differentiated marketing.
Type # 1. Concentrated Marketing:
Through concentrated marketing, the firm gains a strong knowledge of the segment’s needs and achieves a strong market presence. Furthermore, the firm enjoys operating economies through specializing its production, distribution and promotion. If it captures segment leadership, the firm can earn a high return on its investment.
A simple definition of simple marketing is that “marketing strategy is concerned with focusing all available resources on one segment within the total market”. This is an attempt to match what the firm can do best within a market niche devoid of strong competitors, a strategy of differential advantage, it means one marketing mix, a rather narrow product line and some unique competence, which is the basis for the firm’s competitive advantage in a chosen segment.
The chief advantage of concentrated marketing is that an organization can become a specialist in the needs of the chosen market segment. This enables it to save cost through large runs of a small number of products and it also tends to have a positive impact on advertising and distribution. This type of marketing results in a quasi-monopoly position. Moreover, highly satisfied customers will become strong loyalties.
But the disadvantages of concentrated marketing are:
i. The economists believe that “it is wrong to put all the eggs in one basket”.
ii. A company may concentrate on one market segment and it neglects another that might also prove profitable.
iii. Finally, its demands decreases all of a sudden or with increased competition, which may adversely affect the market share.
This type of marketing is followed by the Johnson and Johnson Company to market its baby products. Similarly, car manufacturers that sell luxury cars, consumable durable company’s that market microwave ovens, fully automatic washing machines, etc.
Type # 2. Undifferentiated Marketing:
Contrary to concentrated marketing, in undifferentiated marketing, firms treat the entire market as a target by competing successfully using the same marketing mix. Such a marketing strategy is related to when it is found that there are some products which have a broad – based appeal and hence there is no need for their segmentation. Coca-Cola, Pepsi, Thumps up, Tropicana, etc., are examples of undifferentiated marketing.
In undifferentiated marketing, the firm ignores segment differences and goes after the whole market with one offer. It designs a product and a marketing programme that will appeal to the broadest number of buyers. This type of marketing strategy relies on mass distribution and mass advertising. It aims to place the product with a superior image in
people’s minds. Philip Kotler defines undifferentiated marketing as “the marketing counterpart to standardization and mass production in manufacturing”.
The advantages of undifferentiated marketing are:
(i) The firm can reduce expenses on research and development, production, inventory, transportation, marketing, advertising and product management.
(ii) This cost reduction will help the firm reduce the cost of production and give products and services at lower rates to customers.
Type # 3. Differentiated Marketing:
In differentiated marketing the firm attempts to appeal to the entire market by designing different products and marketing programmes for different segments of the market. For example- Godrej, Hindustan Lever Limited, etc., have many toilet soaps under different names, for the higher income group, middle income group, lower income group, etc. Similarly, Lipton and Brooke Bond Company have different types of tea leaves priced at various ranges and promoted through a variety of appeals.
By doing so marketers hope to achieve additional sales and increased customer identification with a brand or company name. This type of marketing is followed by most medium and large sized firms doing business in many markets with a broad product line. Another example is consumer durables like refrigerator, televisions, air conditioners, etc. Companies have different products to suit different income groups.
Differentiated marketing usually involves some differentiation among products and brands as well as in pricing, promotion and distribution. Such marketing is often characteristic of affluent markets, where consumer needs and wants are so precisely defined. Moreover, in this situation, markets become more and more segmented and sub-divided to such an extent that segments are no longer economically viable.
Short-Term and Long-Term Target Market Segments:
Remember to develop short-term segments (those responsible for sales within the next year) and also distinct, long-term segments (those that you wish to develop over the next two to three years but that will not account for significant sales in the short term). Long-term target markets typically require significant changes in product, distribution, or operational requirements prior to your effectively satisfying the customers in these groups.
Primary and Secondary Target Markets:
When you develop your target market segments, remember that there are varying degrees of importance among the target segments. We group these segments into primary and secondary target markets. While the spending and focus emphasis is different for primary and secondary targets, both are responsible for generating sales. Primary targets typically have greater spending emphasis and contribute to generating sales at far greater rates than secondary target markets.
Primary Target Market:
A primary target market is your main consuming group. These consumers are the most important purchasers and users of your product and will be the mainstay of your business. In some cases, the primary target market is the heavy user (one-third or less of the purchasers who account for two-thirds or more of the purchases).
For companies that are more niche oriented, the primary target will be a smaller, though viable, section of the market that requires selective or specialised goods and services. And in some situations, there will be a primary target market that is an intermediate channel, such as a distributor, and a primary target that is a consumer or end user. Both targets will have different ties to sales and both will require separate plans.
The following criteria should be fulfilled before you finalise a primary target market choice:
a. Make sure the customer base is large enough in terms of actual numbers of consumers and volume of purchases. What percent of the product category’s volume does your primary target market consume? Given your projected market share, is it enough to support your business? A common reason for a plan’s failure is a target market that is too small and limiting. Ideally, try to get your primary target market profile to be accountable for approximately 30-50 percent of the category volume.
For example, if 18- to 24-years-old accounted for only 10 percent of the consumption, the marketer would need to expand the age criteria beyond 18- to 24-years-old until the age group was broad enough to account for more volume. However, if the purchase behaviour or the purchasing criteria were distinctly different among 18-to 24-years-old than among other age groups, the marketer would need to establish a number of smaller target markets something that is much more difficult and expensive to execute.
The 30-50 percent criterion can be lower if you are going to specialise against a more narrow purchaser/user base but obtain a larger market, share against this segment. However, you must be certain that your company has some special tie to the narrow niche that will command loyalty.
b. Make sure the target market is profitable. Determine that the target market purchases sufficient quantity to assure profitability.
c. Try to estimate the trending of your primary target market. Is it a growing or shrinking segment? If it is shrinking, will the market be large enough to support your business at its current market share in five years? If not, this should be a danger signal.
d. Make sure that your primary target market can be narrowly defined by one unified profile. The primary target market should be a group of individuals or companies with the same basic identifiers and purchasing behaviour. This will allow your marketing effort to be focused against essentially one type of individual.
The primary target market becomes the company’s reason for being. You are in business to determine the primary target market’s wants and needs and to provide for those wants and needs better than your competition. This pertains to providing the product, service, shopping or sales environment, distribution channel, and price structure that is required by the customer for purchase. The better the definition and description of the consumers in your primary target market, the better you will be able to market to them.
Secondary Target Markets:
Most plans will identify multiple target markets. The primary target markets receive priority and a majority of the marketing spending, because they will most directly influence the short-term financial success of the plan. The secondary target markets are also important, because they provide additional sales and/ or influence on the sales to the company beyond that of the primary target market as well as future sales to the company.
A secondary target market can be one of the following:
a. A segment currently too small to be a primary market but shown to have future potential. In some cases, you may identify segments with great growth potential but that currently are very small in absolute purchasing power. In other cases, there might be a large segment that would become a primary target as a result of fundamental marketing changes making your product or service more attractive to this market.
b. A demographic category with a low volume but a high concentration index. Often there is a distinct demographic category that accounts for a small percentage of the volume but contains a high concentration of purchasers. For example, 18- to 24- years-old may account for only 10 percent of the total product category purchases, but 50 percent of the 18- to 24-years-old may purchase the product.
This may be due to popularity of the product among this age group but fewer total purchase occasions or purchase of more inexpensive product models. In any case, a great percentage of the target uses the product, providing the opportunity for efficient use of marketing and little wasted coverage in targeting the segment.
c. Subsets of purchasers or users who make up the primary target markets. Your primary target market should ideally be one unified profile of customers accounting for greater than 30 percent of the category volume. This allows for a focusing of resources and message in the marketing effort.
However, there are situations in which the volume of any one target market is not substantial enough to qualify it as a primary target market. In addition, each smaller target market has different demographics, needs, wants, product usage, and purchasing behaviour. An example of this is in the target market we developed for a regional menswear retailer.
The retailer was selling primarily suits and sport coats. There were many purchasing profiles, but no single profile group provided enough volume to allow for targeting against that group. The primary target market became very broad and encompassed businessmen who were 18 to 54 years of age. However, the following secondary target markets were developed, with subsequent marketing emphasis and programmes against each.
a. Men, 18 to 24, college graduates, entering the working world and looking for affordable suits.
b. Men, 45-plus, higher income, at the top of their profession, interested in quality menswear and needing to update their wardrobes.
c. Women 18 to 34; women have a great influence over men’s purchases of suits and sport coats. Spouses also purchase a substantial number of sport coats as gifts and accompany men in more than 50 percent of their shopping trips, serving as advisors.
d. Blue-collar males who need an all-occasion suit; price is a concern.
e. Target markets were also broken out by type of profession, as this helped dictate quantity and style of suit purchases.
Influencers:
Influencers can be a primary or secondary target market, though in most situations they are a secondary target market. These are individuals who influence the purchase or usage decision of the primary target market.
A good example of this is the influence children have on their parents in the purchase of many consumer goods, from toys to fast food. Another example is the influence of architects in the use of precast concrete. While the general contractor and the engineer make the actual purchase decision, the architect has tremendous influence both up front in the design of the building and in the final selection of materials.
Influencers are of particular importance in public sector marketing, where outside forces can affect the success of an organisation’s marketing programme. In a statewide bus transit marketing effort, we concentrated marketing efforts against current and potential riders as our primary target, but we also targeted opinion leaders, major employers, and education leaders, all of whom affect communities’ public support of the bus system, as our secondary market.
In business-to-business situations, a secondary target can often be a customer who currently does not purchase heavily from your company but who has high purchasing potential. You can delineate the potential of this customer by estimating your competitors’ sales to this customer and determining what additional needs your company can fulfill for this customer.
Further, manufacturers most often include an intermediate channel as a secondary target segment. This target might be a fabricator, distributor/wholesaler, or retailer that should receive special attention in order to make sure the product is available for the end user to purchase. This is particularly true in marketing consumer goods, with minimal retail shelf space available and multiple competitors selling the same type of product. Often, so much time and money is devoted to selling to the end user that the intermediate channel is taken for granted.
Conversely, many business-to-business manufacturers, because they are selling directly to an intermediate target market (which is their primary target), push these products through the primary distribution channel (often using low prices and promotions) and put less marketing emphasis on the end user to pull the product through the channels. It might be more efficient in the short-term to push the product through intermediate markets. However, the end user should not be totally ignored, as this may mean a loss of demand and loyalty for your product or brand over the long-term.
Purchaser and/or User Determination:
Many times the purchaser of a product is different from the user. If this is true in your situation, you need to decide who has the major influence over the actual purchase. Does the one who drinks the beer request- a special brand, or does the beer drinker drink what the shopper purchases? In most cases, the individual who does the purchasing becomes the primary target market. However, when the purchaser primarily buys what the user requests, then the user receives primary attention. You must determine whether the primary target group will include purchasers, users, or both.
However, keep in mind that it is very difficult (not to mention expensive) to effectively market against two primary markets. Because this is an encompassing step in the defining process, step back and attempt to determine which of these two targets is the driving force and what makes up their purchase and usage behaviour.
Consider these two factors in your determination:
1. The inherent benefits of your product to one target or the other.
2. Who the competition chooses as its target market.
Target Market – 4 Basic Strategies to Satisfy Target Markets
Marketers have outlined four basic strategies to satisfy target markets:
1. Mass Marketing:
In this strategy, a company decides to ignore market segment differences and go after the whole market with one offer. It is the type of marketing where the marketer is seen attempting to sell through persuasion, to a wide range of consumers. The idea is to broadcast a message that will reach the largest number of people possible. Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience.
2. Differentiated Marketing:
Under this strategy, the company decides to provide separate offerings to each different market segment which it targets. It is also called multi segment marketing and as is evident that it tries to appeal to multiple segments in the market. Each segment is targeted uniquely as the company provides unique benefits to different segments. It increases the total sales but at the expense of increase in the cost of investing in the business.
3. Concentrated Marketing or Niche Marketing:
This approach focuses on selecting a particular market niche on which marketing efforts are targeted. Company focuses on a single segment so that; the marketer can concentrate on understanding the needs and wants of that particular market intimately. Small firms often benefit from this strategy as focusing on one segment enables them to compete effectively against larger firms.
4. Direct Marketing:
One way to reach out to target markets is through direct marketing. This is done by buying consumer database based on the defined segmentation profiles. These databases usually come with consumer contacts such as, email, mobile no., home no., etc.
Target Market – Evaluation and Selection of Target Market Segments
1. Evaluating Marketing Segments:
In evaluating different market segments the firm must look at three factors:
(a) Segment size and growth.
(b) Segment structural attractiveness.
(c) Company objectives and resources.
(a) Segment Size and Growth:
The company must first collect and analyse data in current segment sales, growth rates and expected profitability for various segments.
i. It will be interested in segments that have the right size and growth characteristic.
ii. But the largest, fastest growing segments are not always the most attractive ones for every company.
iii. Smaller firms may lack the skills and resources needed to serve the larger segments or may find these segments too competitive.
iv. Such companies may select segments that are smaller and less attractive in an absolute sense but that are potentially more profitable for them.
(b) Segment Structural Attractiveness:
The company also needs to examine major structural factors that affect long run segment attractiveness.
A segment is less attractive due to:
i. Competitors who are strong and aggressive.
ii. Substitute products. (Actual or potential.)
iii. Relative power of buyers. (Demand for more services, less price etc.)
iv. Powerful suppliers (Who can control prices or change quality or quantity of material).
(c) Company Objective and Resources:
Even if a segment has the right size and growth and is structurally attractive the company must consider its own objectives and resources in relation to that segment.
i. If a segment fits the cost objectives the company must consider whether it possesses the skills and resources it needs to succeed in that segment.
ii. Company should enter only those segments where they can develop competitive advantage, i.e., where it can offer superior value and gain advantage over competitors.
iii. Finally a segment may be a poor choice from an environmental, political or social responsibility view point.
2. Selecting Market Segments:
After evaluating different segments the company must now decide which and how many segments to serve. This is the problem of target market selection. A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
The firm can adopt one of the three marketing coverage strategies:
(a) Undifferentiated marketing.
(b) Differentiated marketing.
(c) Concentrated marketing.
(a) Undifferentiated Marketing:
(i) A marketing coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.
(ii) This mass marketing strategy focuses on what is common in the need of customer rather than what is different.
(iii) The company designs a product and a marketing strategy that will appeal to the largest number of buyers.
Benefits of Undifferentiated or Mass Marketing:
(i) It provides cost economies.
(ii) The narrow product line keeps down inventory and transportation cost.
(iii) Keeps advertising cost low.
(iv) The absence of segment marketing research and planning lowers the costs of marketing research and product management.
(i) It is difficult to develop a product that will satisfy all consumers.
(ii) When several firms do this, heavy competition develops in the largest segment and less satisfaction results in the smaller ones.
(b) Differentiated Marketing:
A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each.
(i) By offering product and marketing variations these companies hope for a higher sales and a stronger position within each market segment.
(ii) They also hope for more loyal purchasing because the firms offer better matches for segment desires.
Differentiated marketing typically creates more total sales than does undifferentiated marketing.
(i) It increases the cost of doing business.
(ii) Developing separate marketing plan for separate segments requires extra market research, forecasting sales analysis, promotion planning and channel management.
(iii) Trying to reach different market segments with different advertising increases promotion costs.
(c) Concentrated Marketing:
A marketing coverage strategy in which a firm goes after a larger share of one or a few sub market.
Benefits:
(i) Specially appealing strategy when company resources are limited.
(ii) Provides an excellent way for small new business to get a foot hold against larger more resourceful competitors.
(iii) Company enjoys operating economies because of specialisation in production, distribution and promotion.
(iv) They can satisfy their customers better as they know their needs.
Involves higher than normal risk as it concentrates on only one or few market segments.
Target Market Selection:
A target market is a group of customers that the business has decided to aim its marketing efforts at and ultimately its merchandise towards them as a strategy. The target market and the marketing mix variables of product, place, promotion, and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace.
Therefore, Target markets are groups of individuals that are separated by distinguishable and noticeable aspects.
Target markets can be separated by the following aspects:
1. Segmentations – that is their location climate region
2. Demographic or socioeconomic segmentation – that is gender, age, income, occupation, education, household size, and stage in the family life cycle
3. Psychographic segmentation – which means similar attitudes, values, and lifestyles
4. Behavioural segmentation – that is occasions, degree of loyalty
5. Product-related segmentation – that is relationship with a product
For example MC Donald’s has burger ranges from rupees 20/- to rupees 150/- catering to all type of customers, right from the age of 2 years and above to 60 years and above customers.
Target Market – Examples of Selection of Target Marketing Strategies
1. TITAN:
TITAN’S marketing strategy succeeded because TITAN built it up on the foundation of a magnificent strategy of target market. The high quality and high price of quartz watches of TITAN naturally pointed to the target group with a taste for good things of life and the willingness and capacity to pay the price on the basis of value for money. The upper level income groups living in urban areas who are fashion conscious as well as quality conscious are the target segment for Titan watches.
TITAN changed the very concept of the watch business through its clever market segmentation and market targeting. It targeted its products exclusively on the fashion conscious segment and for meeting the requirements of this segment, it created unique products using the new technology.
2. Pulse Oximeters:
Pulse Oximetery is a convenient, rapid, non-innovative technique for determining oxygen saturation to detect hypoxemia. It is often performed as part of routine vital sign monitoring. Continuous monitoring is particularly useful for patients with more serious or rapidly evolving illness and at night to bridge the intervals between spot checks.
This can be done on the following:
i. Intensive Cardiac Care Units (ICCU)
ii. Intensive Care Units (ICU)
iii. Main Operation Rooms (OR)
iv. Special Baby care unit
v. Post anaesthesia care units
vi. Casualty, Emergency, Trauma units
vii. Small Operation Rooms
viii. Paediatrics ward
ix. Neonatal ICU
x. Labour/Delivery ward
xi. Labour room
xii. Surgical ward
xiii. Day care operation room
xiv. Endoscopic clinic
xv. X-ray, MRI, CT rooms.
Thus, Pulse Oximeters occupy most of the place in Hospitals and Nursing Homes and Government hospitals. Pulse Oximeters are widely used by Anesthetists, either it may be a small Nursing Home, Government Hospital or a large Corporate Hospital. Anesthetists play a vital role in deciding the purchase of pulse oximeters in any hospital.
Target Market – Target Market is Governed by the 7 Ps of Marketing
Target market is governed by the seven Ps of marketing, namely:
1. Price,
2. Promotion,
3. People,
4. Process,
5. Physical environment,
6. Product, and
7. Place.
1. Product:
The product can have both tangible and intangible aspects, and is something that is offered to satisfy customers’ wants and needs. Now it becomes easy to consider aspects such as the product range, its quality and design, features and the benefits, size, and packaging and any add-on guarantees and customer service offerings.
2. Price:
Sound pricing decisions are crucial to a successful business and should be considered at both long-term strategic and short-term tactical levels. Within this element of the mix the company should consider list price and discount price, terms and conditions of payment and the price sensitivity of the market. It is important to keep in mind the fact that the cheaper the price, the lower income group market can be tapped.
3. Promotion:
If appropriate methods of promotion are not used then it will certainly result in wastage of money. There are many different promotional techniques such as Advertising, Public Relations, Sales Promotions, and Direct Selling. These techniques are used to communicate the specific benefits of the product to the customers. Targeting can be done through this technique very effectively.
4. Place:
The word ‘Place’ is used to describe distribution channels. The company’s choice of such channels is important. For example, a common issue for businesses which is starting to trade online is ,how that will affect their off-line business, for example selling directly through the web could alienate retail outlets that have been the mainstay of the business in the past. Targeting the customer of a large group of customers depends a great deal on the place.
5. People:
The impact that people can have on marketing cannot be underestimated. It is obvious that this covers the front line sales and customer service staff who will have a direct impact on how product is perceived. Knowledge and skills of the staff, their motivation and morale must be considered by the company. The people element is very important as it has a direct bearing on the quantum of the target market.
6. Process:
The process part of the mix is about ease in doing business in relation to the process. The company must look at it from customers’ point of view. The process problems that are most annoying to a customer are those which are designed for the company’s convenience and not the convenience of the customer.
7. Physical Evidence:
When a company sells tangible goods, it can offer the customer a chance to ‘try before they buy’, or at least see, touch or smell. With services, unless a free trial is offered, the customer will often be buying on trust. And to help them do so you need to provide as much evidence of the quality you will be providing as possible.
Therefore, physical evidence refers to all the tangible, visible touch points which the customer will encounter before he/she buys. The better the physical evidence, the bigger will be the target market.
Target Market – Identifying Market Segments and Target Market Positioning (With 3 Distinct Approaches to Marketing Strategy)
Identifying Market Segments and Target Market Positioning by:
A market segment consists of a group of customers who share similar needs, preferences and buying habits. Market segmentation is a process of dividing the total market for a good or service into several smaller groups such that the members of each group are similar with respect to the factors that influence demand. A major element in a company’s success is the ability to segment its market effectively.
A target market consists of a group of customers (people or organisation) whether large or small; for whom the seller designs a particular marketing mix.
Undifferentiated Marketing and Differentiated Marketing:
There are three quite distinct approaches to marketing strategy:
1. Undifferentiated or mass marketing
2. Product-variety or differentiated marketing
3. Target or concentrated marketing.
1. Undifferentiated or Mass Marketing:
With the development of the production process during the industrial revolution organizations were engaged in mass marketing where they did mass production, mass distribution and mass promotion of one product for all buyers. The firm deliberately ignores any differences that exist within its markets and decides instead to focus upon a feature that appears to be common or acceptable to a wide variety of buyers. Hence, Henry Ford produced Model-T Ford of color black only for the mass. It was freely available and affordable for the public.
Mass marketing creates the largest potential markets giving cost advantage. But over time, consumers’ tastes and preferences started varying widely forming various homogeneous clusters differing from each other. This made many companies turn to micromarketing.
2. Differentiated Marketing:
In product variety marketing (differentiated marketing) the company operates in several markets with different products for each market. For example Coca-Cola for many years produced only one type of drink for the entire market but subsequently they came to the market with wider variety of taste, which are packaged in a number of different sizes and types of containers. It should be emphasized that differentiated or product-variety marketing also offer existing buyers greater variety rather than moving to new product market segments.
Differentiated marketing can be operated at various levels such as:
(a) Segment Marketing:
Here the market is divided into several segments with similar set of wants but here again the marketer does not create the segments, only identifies them and decides which one(s) to target. The car market has several segments from entry level low cost car to luxury sedan (A, B, C, D, E – segments). Segment marketing offers several benefits over mass marketing. A company can create a more fine-tuned product or service offering and price it according to the target segment. Some marketers also present flexible market offering instead of standard offering to all members of the segment by providing-
i. A naked solution containing the product and service elements that all segment members value.
ii. Discretionary options that some segment members value.
(b) Niche Marketing:
A niche is a more narrowly defined but attractive market segment requiring distinctive mix of market offering. A niche segment is derived as a sub-segment of a particular segment. For example MBA program for small family business owners. Generally, a niche market is too small for big corporates but attractive for smaller players who can offer specific benefit to the niche.
An attractive niche is characterized by the fact that the customers in a niche have a distinct set of needs; they will pay a premium to the firm that best satisfies their needs, the nicher gains certain economies through specialization and the niche has size, profit and growth potential.
In many ways, differentiated marketing can be seen as a step towards target marketing in which the marketer identifies the major market segments, targets one or more of the segments and then develops marketing programs tailored to the specific demands of each segment.
3. Concentrated Marketing:
When target marketing leads to a concentration of effort with a single marketing mix on a single target market, referred to as concentrated segment. For example, Steinway, the piano maker, concentrates on the market of concert and professional pianists.
Target Market – Target Audience (With Groupings)
The target audience may be individuals or groups, niche markets, market segments or mass audience. It is the responsibility of the marketers to identify each segment and to develop the marketing plan accordingly, to generate effective communication process, suitable for individual segments. Marketers should communicate with the people who make or influence the purchase decision.
A definite communication strategy may be developed in order to reach the specific market segment. A very well defined group of customers may be referred to as market niches. The niche market should be approached through highly targeted media or personal selling efforts.
Marketers are interested to attract mass market through broader based media or mass communication techniques such as advertising or publicity. The marketer should develop the communication process after considering the effect of the message. Receiver’s response pattern is highly important in the process of communication.
Target Audience Groupings:
There are different ways of target audience grouping. It may be grouped in terms of three levels:
1. General Level – This group is considered in terms of descriptive characteristics (e.g. age, income, geographic location) of lifestyle variables (e.g. sports, travel) and psychographics (e.g. outgoing, risk-taking).
2. Domain-specific Level – This group is described in terms of product associated characteristics (e.g. taking lot of frozen food, owning number of cars).
3. Brand-specific Level – The group believes in brand loyalty (i.e. buy the same brand all the time or most of the time) and beliefs about the brand.
In recent years, the notion of loyalty has become a key issue in marketing.
This attitude is dependent on four dimensions:
i. Interest in competitive alternatives,
ii. Overall satisfaction,
iii. Category involvement and
iv. Intensity ambivalence (i.e. with mixed feelings).
According to L. Percy, the consumers are assigned to one of the following four groups. The vulnerability to switching brands and loyalty are the two extreme ends.
Loyalty related audience grouping can be made as follows:
1. Loyal – Highly satisfied with their brand and unlikely to switch.
2. Vulnerable – Satisfied with the brand but there are risk of switching.
3. Frustrated – Not satisfied with their brand but not ready to switch.
4. Switchable – Dissatisfied with the brand but not decided regarding switching.
It is important to look at the roles that people play in purchase decision making process. A ‘Decision Participant Grid’ may be helpful to analyse the role of an individual prospect or persons who might be involved in the process of buying. In this exercise a list is prepared of the possible participants.
The target audience is divided into two categories. One is known as consumer and the other is the provider. For example for planning a holiday trip, travel agents may play the role of the initiator or the provider.
Target Market – Target Marketing and Positioning of Business Marketing
Positioning is a marketing concept that outlines what a business should do to market its product or service to its customers. In positioning, the marketing department creates an image for the product based on its intended audience.
This is created through the use of promotion, price, place and product. The more intense a positioning strategy, typically the more effective the marketing strategy is for a company. A good positioning strategy elevates the marketing efforts and helps a buyer move from knowledge of a product or service to its purchase.
The best start for any positioning analysis is gaining a thorough knowledge of a product or service’s target market. This is the group of people or businesses that will best benefit from the use of the product or service.
With a good idea of the wants, needs and interests of a product or service’s target market, a good marketing team can help develop a positioning statement to help reach as much of the target market as possible.
Positioning in Advertisements:
Advertisements are usually the first places businesses position themselves. A cosmetics marketing department, for example, must determine who they are targeting and what consumer need is being met.
If the intended target is African American teenagers, what type of need should the cosmetics fill? If the cosmetics line is trying to help teenage girls overcome acne issues, the person in the ad might be one of a younger African American physician who teaches girls how to battle acne with the use of these cosmetics.
To note the importance of positioning, this same type of advertisement might not work if the intended audience of the cosmetics line was older Caucasian women trying to look younger.
Positioning in Sales Locations:
Reaching the customer is not simply a matter of advertising; it is also a matter of choosing the right channels for distribution. If a majority of your target market lives in an urban area with only public transportation available to them, having your product in rural areas where a private automobile is needed for transport would not equal sales success.
Place or position your product or service as close to the target market as possible. Create similar advertisements in store as the ones seen out of store to create an overall identity for your brand.
It should be noted that there is a large amount of research on the psychology of pricing in marketing. Simply put, the price of an item tells the buyer more about the item than most realize. Many associate a higher price with higher quality and the opposite with a lower price.
Additionally, if a product is positioned as a good alternative to high priced brands, the marketing department must price it in the middle of the market to avoid a comparison to the cheapest end of the spectrum.