What is Customer Targeting?
Customer targeting refers to the process where the most profitable group of customers are selected out of many other groups, along with which matches the firm’s objectives and resources.
While targeting customers, the basic factors such as the firm’s objectives, available resources, the size of the target market (customer), the growth rate of the market, long-term profit & success of the firm, and the overall firm’s strategy are considered.
Customer segmentation is an effective way of doing this since it divides the whole market into many segments. Which, in turn, helps the firm to figure out which segment has good potentiality, which has not, which should be selected, or which should be not?
Targeting customers begins by identifying the total market, dividing the total market into many segments, selecting the most profitable and promising segments, and serving these segments with a well-designed marketing mix program.
For the effective implementation of this process, the firm/marketer should go through the following three steps.
Customer Targeting Steps
The following customer targeting steps help firms to target and select an appropriate customer market and earn a competitive profit, which is the most attractive profit these competitive days.
Analyze Marketing Opportunities
The customer targeting process begins with the identifying of opportunities in the marketplace. Most of the opportunities likely come to the firm because of this,
- A change in technology provides opportunities for new product development by the new technology.
- An increase in consumers’ purchasing power may allow the marketing of luxury products and leisure-related services.
- Socio-cultural dynamism may bring new attitudes, beliefs, and behavior demanding new products and services.
A marketer must watch, identify, and measure new opportunities arising in the marketplace. The new opportunities have to be carefully analyzed to identify their viability and profitability.
For analysis of opportunities, the marketer must measure the demand and make forecasts, regularly monitor, and scan the environmental forces, and analyze the buyer’s and competitors’ behaviors.
Developing Marketing Strategies
After the opportunities have been adequately analyzed and assessed, the marketer has to develop alternative marketing strategies. Initially, he needs to develop segmentation, targeting, and positioning (STP) strategies.
Segmentation
Segmentation involves finding a homogenous cluster of buyers with similar needs (problems) with similar characteristics.
It is implemented by dividing the total market into smaller segments through demographic (gender, age, income, family size, etc.), behavioral (product usage, benefits sought, loyalty), and lifestyle (motivations, personality) variables. The main objective of segmentation is to identify and focus on profitable target markets.
Targeting
Targeting involves locating markets to operate on the basis of its size, growth potential, and long-term profitability. The firm may select one or more segments to enter if it thinks it is capable.
The firm should select those markets in which it can sustain for a long time and also be able to deliver greater value than its competitors.
Positioning
Positioning involves finding customers’ perceptions of the firm’s products and services to find the differentiating factors. The firm may select one or two such key factors, build a favorable image or market position on those factors and reinforce those factors through the proper implementation of the marketing mix.
In addition to these STP strategies, the firm has to develop several strategies options relating to the product, price, distribution, and promotion. Once the strategies have been evolved the marketer has to analyze the viability of strategic options in terms of long-term profitability and survival of the organization.
This step of customer targeting requires the firm to build a detailed program to implement the selected marketing strategy in order to capitalize on the new opportunities.
The firm has to formulate a marketing plan and action program for effective implementation. This stage requires more precise estimates of sales, costs, and profits from new actions, activities, and programs.
Developing Strategies For Competitive Advantage
This is the last step in the customer targeting process. The competitive advantage is a dynamic process in which a firm identifies the sources of advantage, selects a position based on the advantage factors(s), and creates performance outcomes.
There are mainly three main basic sources through which a firm can gain a competitive advantage in the market.
- Superior Skills – Technical, managerial, and operational skills that differentiate an organization from its competitors.
- Superior Resources – Strong distribution networks, production capacity, manpower, technology, and financial resources.
- Superior Controls – Cost controls, performance benchmarks, monitoring systems, and marketing information systems.
Apart from the three basic sources, a firm may gain a competitive advantage through its effective positioning in the competitive market. The positioning advantage is gained through providing superior customer value to its customers.
Low-cost and differentiation strategies generate superior value for customers. Michael Porter’s (1980 and later revised) Generic Strategies Model presents three strategic alternatives to generate superior customer value.
- Overall Cost Leadership – Strategy adopted by larger firms having cost advantages through the efficient scale of operation. Overall cost leadership is achieved through high market share, low-cost technology, and production process, or low-cost marketing.
- Differentiation – Creating product and service differentiation so that the firm’s offers are perceived as unique by customers.
- Focus – Focusing on a certain buyer or buyer group, specific product line, and a particular market area and designing a marketing mix to serve the target market better than competitors.
The firm needs to select a path or strategy to gain the advantage and generate the performance outcomes in terms of customer satisfaction, brand loyalty among its customers, larger market share, and higher profitability.
Continuous and sustained investment in R&D, innovation, marketing research, and building entry barriers for present and potential competitors will sustain the competitive advantage.
Summing Up, ultimately customer targeting is not only remained at selecting the most feasible consumer market in terms of profit and long-term sustainability of the firm. Rather, it also includes the ability of the firm to serve the customers the way they want or needed products.
Marketers hence should use appropriately the STP (segmentation, targeting, and positioning), and also develop other supporting marketing strategies, in order to, satisfy the targeted customers and to realize the competitive advantage to ensure lone term profit and success.