Target Marketing and Market Segmentation
Definition of Target Market
To ensure that marketing efforts fulfill customers’ needs and wants as well as bring profits, the business should identify and focus its efforts on a selected group of customers. This is to ensure that the marketing efforts taken are within the scope and capabilities of the business. The target market is therefore defined as a group of customers with specific needs and wants that can be satisfied by the business through supply of specific goods and/or services.
Importance of Identifying the Target Market
There are several reasons why a business decides on a specific target market. The first reason is that it is impractical and almost impossible for a business to offer a product that can satisfy the needs and wants for the entire population. The second reason is that most business has limited resources in terms of time, money and manpower. This limitation means that the business must focus its activities on attracting a core group of customers that has the highest potential to purchase goods or services offered.
The existence of a target market does not mean that a business should ignore the other groups of customers that exist in the same market. These other groups may be the secondary market and may bring income to the business. However, the main income is derived from the primary target market. As circumstances change, a business may also change its target market.
Steps in Identifying the Target Market
1. Identify the product or service to be offered
A business needs to first identify a viable product or service based on the needs and wants of the market. This is often done through a survey that can give vital information and ideas about products that the business can offer. As an example, a general survey of the Malaysian public revealed that a large and growing percentage of the population prefers chicken meat and chicken based products. The survey also indicated that the main consumers for these products are town and city dwellers within the age of five to 25 years.
Possible businesses or products that can be developed from the survey include chicken rearing, processed chicken, chicken meat supply, processing of chicken meat based food products, manufacturing of chicken feed and fast food catering service based on chicken meat. While each idea fulfills a basic need for chicken based food in different ways, each idea or product may require different business set-ups and marketing efforts.
2. Second: Focus the marketing effort
After identifying products or services that can satisfy the needs and wants of the market” the business should focus its marketing efforts as follows:
Identify the market area and business location
A market area can be segmented by certain geographic factors, such as region, states, cities, towns or districts. The key factor to consider is the physical distance between the business location and the target market. In small and medium-sized businesses a suitable physical distance depends on the nature of the business and the relative importance of being physically close to the target market. Business that manufactures its product in one place and sells them at various locations will enjoy better market coverage compared with a business that depends on customers to frequent their premises. Other factors that may influence the geographic consideration include access to the business premises, customer mobility, additional horne delivery services as well as the availability of public transport system in that area.
Collect information and data of customers
The business has to compile as much information and data as possible of ‘ the customers in the market area selected. Information can be based on personal details and attributes of the population in that area, their lifestyles and any psychological factors that may influence buying habits.
Segmenting the market
By compiling the geographic, demographic and psycho-graphic factors of the market can now divide the total market into smaller groups or market segments based on identifiable common traits and buying preferences Thus, within the same geographic area. It is possible to have several market segments. Mistakes in market cause businesses to lose sales.
Market segmentation has been widely used by marketers. The shampoo market, for instance, has been segmented by different variables such as gender, hair conditions, hairstyles, hair care, usage pattern, usage frequency and even lifestyle. Through segmentation, a business can identify an overlooked market and develop a product to exploit that market.
3. Third: Determine the target market
Once the market segmentation has been identified, select a target market for your business niche. In general, a target market is selected by a high potential of profit compared to other market segmentation.