What is Market Targeting?
Market targeting is the process/practice of selecting the best market segment that has greater profit opportunities for the business firm where consumers’ needs and wants match with the firm’s offerings. Target marketing enables business firms to provide greater satisfaction to the selected customers and increases sales and earnings.
For market targeting, first, the business segments or divides the whole market into many segments, analyzes & evaluates each segment, and selects the best segment. It gives firms or marketers to get a better understanding of the targeted market and makes marketing efforts – product, pricing, promotion, distribution more effective and impactful to specific customer groups. Targeting is the second part of the STP model of marketing.
What is a target market? Market targeting is simply, also known as only targeting because targeting always means selecting some specific. A target market is a particular group of consumers whom a business firm aims its products and services to serve.
When we talk about market targeting we are talking about selecting a target market. Before understanding targeting, you may need to understand, that market segmentation – is a process of diving a whole market into many markets or segments based on factors such as customers’ need, want, and desires.
A market always consists of a heterogeneous mix of customers, it is almost impossible for the company to satisfy all the customers at one time and one kind of marketing mix program. Hence, the mixed set of customers needs to be segmented based on some variables such as their need, want, desire, age, sex, income, education, taste, preference, spending pattern, location, and so on.
Finally, the segment that best suits the strength and objective of the firm is chosen. The better the firm is at identifying its potential target market, the more successful it will be in delivering goods and services.
Marketers should realize that the target market refers to the group of customers that are most likely to buy products and services from the company. When the company has a clear idea of its target market, it is easier to develop products and services that the people want.
How To Select A Target Market?
In market targeting, before selecting a target market, a marketer has to carefully evaluate and analyze each market segment and select. He has to critically evaluate and decide how many or which segment to serve to acquire more opportunities from the desired market segment.
Normally, to select a target market, a marketer has to segment the entire market, gather relevant information, evaluate, analyze, and finally select one. To make it more easier and effective here are three tools that a marketer can use to evaluate and select his target market.
Size and Growth of Segments
A market segment must have the right size. The right size is one, which is manageable and profitable. Big companies usually prefer large segments, while small companies prefer small segments. Similarly, the market segments must have appropriate growth characteristics. Growth means a continuous increase in sales and profit sizes. Over time, the target segments should be able to generate more sales and profits for the company.
Structural Attractiveness of the Segment
Structural attractiveness indicates long-term profit for the company. A market segment might have desirable size and growth characteristics and still not be attractive from the viewpoint of profitability. The profitability of the company, to a large extent, depends upon several forces:
- Several competitors and their strengths.
- Rate of the new entrance in the target market.
- Availability of potential substitutes in the market.
- Bargaining power of buyers and suppliers.
- Profitability to the company may exist if the following conditions are fulfilled.
- Several competitors and the nature of competitors.
- Barriers to new entrants in the target segments.
Company Objectives and Resources
Although a market segment has positive size and growth characteristics and is structurally attractive, it may not match the company’s long-run objective. A market segment must be able to achieve the company’s desired goal. Similarly, the company must have adequate resources in terms of finance, human resource, etc. to manage the market segments properly and successfully run the market.
If marketers can integrate all these tools properly, then they can select the desired market segment, which is called a target market.
Types of Target Market
In targeting, while selecting a target market may be the marketers have to face many problems regarding the market coverage. Based on market coverage, a target market can be classified into three categories as follows:
The single-coverage target market also known as single-segment concentration, focuses on only one segment to concentrate its marketing activities. Here, the company enjoys many operating economies through specialization of its production, distribution, and promotion risks
But, in this market, the company can not survive if the target customers stopped buying products or diverted towards another product because no alternative is available to the company in this coverage.
In this second type of target market, the firm concentrates only on certain selected segments i.e. more than one segment. As it covers more than one segment, however, it does not cover all market segments. Under the limited coverage market, there are also three types of market segments.
Product Specialization: It is a single product to many markets strategy. Here, a firm focuses on making and distributing a particular product to a variety of consumer groups. For example, a microscope manufacturer might sell it to university laboratories, government laboratories, and commercial laboratories. The firm is prepared to make difference for these different customer groups but avoids getting in to the production of any other instruments that laboratories require to use.
Market Specialization: In market specialization, the firm focuses on serving the needs of a particular customer group i.e. many products for a single market. Eg. the company deals with an array of products for university laboratories, including microscopes, Bunsen burners, chemical flasks, laboratory tubes, and so on.
Selective Specialization: In selective specialization, the company selects a few market segments, each of which is objectively attractive and matches the company’s objectives and resources. This strategy is also known as multi-segment coverage has the advantage of diversifying companies’ risks. Here, if one segment becomes unattractive, the company can continue to sell and earn profits in other segments. Also, each segment requires a separate marketing program.
In this market coverage, the company attempts to select and serve all customer groups. Greater penetration into each segment is combined with broad coverage of a total market. This is a high sales strategy.
Coca-Cola, General Motors, IBM all these large companies have adopted this strategy. Coca-Cola targets all children, youths, and old people. A single marketing program can serve all customers known as mass marketing or market aggregation.
Market Targeting Strategies
There are several market targeting strategies a market can use to select its target market. The most popularly used market targeting strategies are:
Market Aggregation Strategy
The market aggregation strategy’s synonym is mass marketing. It is the marketing of a single product to all sets of consumers. Here, a firm markets its single product to all customers also with a single marketing plan.
The purpose of this marketing strategy is to reduce the per-unit cost of production by high production, high promotion, high distribution, making a large market, and making more sales. However, this strategy creates a very high level of competition in the market.
Market Segregation Strategy
The synonym of the market segregation strategy is segment marketing. It is a process of making many segments of an entire market. It divides a whole market into different small markets. It may divide the market by focusing on consumers’ need, desire, want, etc.
It gives a very clear picture of each segment and a thorough understanding, which enables marketers to design a marketing plan and serve the target market in the best-best possible way. And, each market segment requires a distinct marketing strategy.
A concentrated marketing strategy focuses on a very specific group of customers. It offers very customized services to the target customer. It is also known as niche marketing. The customer of concentrated marketing may demand a very specific type of products or services, maybe for this, they are ready for very high prices to pay as compared to normal consumers.
It only concentrates on only distinct needs, demands, and characteristics of the particular target market. The segment of this target marketing strategy may be too small, which enables it to meet the needs of a narrowly defined market, a small firm can compete, and a successful implementation gets a strong position in the market. However, a large company may interface in niche marketing when it seeks to enter.
It involves the marketing of products and services in a local market or area. It is very popular in village areas of any country, where the locally produced products are sold and consumed by such areas local people. This marketing does not take a lot of effort for marketing, however, the size of the market is small, and maybe the number of products is also fewer. The marketer can make his target market to his neighborhood, community, specific stores, etc.
It is marketing and selling goods/services to a single individual customer. Here, the marketer only concentrates on the individual customer’s need, want, desire, purchasing behavior, sentiments, etc., and produce and uses the marketing mix accordingly. Maybe in this market targeting strategy, the individual customer is served in the very best possible way other than any above strategies.