The selection of target markets is the second major phase of the STP process, as shown in the diagram below. (Where STP stands for segmentation, targeting and positioning.)
As shown, firms initially segment the market and, as part of this process, construct segment profiles for each segment. Included in a segment profile is a detailed description of the segment, along with various size and profit measures. Using this information in conjunction with the firm’s strategy, resources and goals organization appropriate target markets can then be selected.
The selection of a target market is a very important decision for a firm as it then requires significant effort and commitment to implement an appropriate and targeted marketing mix. Target market selection is a key part of marketing strategy and typically involves significant analysis, discussion and review throughout the firm.
The common phrase of “target market” has been heard by many of us and it represents a very important business concept. But how many of us actually succeed in identifying the correct group of people to whom we should sell our products? Or to whom we should direct our marketing efforts? In order to establish your target market, and for target market selection, you need to go beyond the thinking patterns of your customers, their buying habits and their needs.
Target market selection is a part of marketing strategy and involves deep analysis and discussions up to the corporate level. Target market selection is a component of the three main elements of strategy – segmentation targeting and positioning.
A starting point in choosing your target market is to segment the population by clearly defining segmentation factors such as segment size, segment growth rate, profit margins, competitors, distribution channels, the strategy and goals the company want to achieve as well as the required resources.
The second step in selecting your target market consists in conducting an industry analysis of the industry in which your company operates, and identify the potential customers in the respective industry. Only after the analysis of the industry, will you find a group of people who might be interested in your products. Thus, the result of industrial analysis will be the identification of a primary market segment.
After collecting sufficient information from the industry analysis (which also involves market, competitors and broad potential customers), a customer profile should be identified. This customer profile will involve an in depth description including geographical, demographical, psychographic and behavioral insights about your target customers.
The target market selection goes hand in hand with customization. By mapping the exactly worries, concerns and needs of your customers, you will be able to shape your offer according to them. Your main question should be “Do I solve their problems?” and aligning all your marketing, sales and resources functions in order to provide your customers with a solution for their problem.
By focusing on target market selection process, it doesn’t mean that you are cutting down your growth aspirations. On the contrary, it will enhance your growth opportunities based on the industry you are operating in. Usually, it is easier for smaller firms which are competing against the big giants in the market, to focus on a niche market. In this way, they are able to reveal and cover some needs that the competitors are not able to do.
When working with the industry giants, the best way to develop a target market is to find exactly what your customers needs. This need should not be present with a competitor. It should be your own unique selling proposition. When you cover this need of the customer, you have done a proper target market selection.
Target Market Strategies
There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following:
A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and offering new products to its existing market segment.
Another strategy whose use is increasing is <b>individual marketing</b>, in which the marketing mix is tailored on an individual consumer basis. While in the past impractical, individual marketing is becoming more viable thanks to advances in technology.
Suitability of Market Segments to the Firm
Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include:
As shown, firms initially segment the market and, as part of this process, construct segment profiles for each segment. Included in a segment profile is a detailed description of the segment, along with various size and profit measures. Using this information in conjunction with the firm’s strategy, resources and goals organization appropriate target markets can then be selected.
The selection of a target market is a very important decision for a firm as it then requires significant effort and commitment to implement an appropriate and targeted marketing mix. Target market selection is a key part of marketing strategy and typically involves significant analysis, discussion and review throughout the firm.
Target market selection is a part of marketing strategy and involves deep analysis and discussions up to the corporate level. Target market selection is a component of the three main elements of strategy – segmentation targeting and positioning.
A starting point in choosing your target market is to segment the population by clearly defining segmentation factors such as segment size, segment growth rate, profit margins, competitors, distribution channels, the strategy and goals the company want to achieve as well as the required resources.
The second step in selecting your target market consists in conducting an industry analysis of the industry in which your company operates, and identify the potential customers in the respective industry. Only after the analysis of the industry, will you find a group of people who might be interested in your products. Thus, the result of industrial analysis will be the identification of a primary market segment.
After collecting sufficient information from the industry analysis (which also involves market, competitors and broad potential customers), a customer profile should be identified. This customer profile will involve an in depth description including geographical, demographical, psychographic and behavioral insights about your target customers.
The target market selection goes hand in hand with customization. By mapping the exactly worries, concerns and needs of your customers, you will be able to shape your offer according to them. Your main question should be “Do I solve their problems?” and aligning all your marketing, sales and resources functions in order to provide your customers with a solution for their problem.
By focusing on target market selection process, it doesn’t mean that you are cutting down your growth aspirations. On the contrary, it will enhance your growth opportunities based on the industry you are operating in. Usually, it is easier for smaller firms which are competing against the big giants in the market, to focus on a niche market. In this way, they are able to reveal and cover some needs that the competitors are not able to do.
When working with the industry giants, the best way to develop a target market is to find exactly what your customers needs. This need should not be present with a competitor. It should be your own unique selling proposition. When you cover this need of the customer, you have done a proper target market selection.
Target Market Strategies
There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following:
- Single-segment strategy - also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources.
- Selective specialization- this is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary.
- Product specialization- the firm specializes in a particular product and tailors it to different market segments.
- Market specialization- the firm specializes in serving a particular market segment and offers that segment an array of different products.
- Full market coverage - the firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment.
A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and offering new products to its existing market segment.
Another strategy whose use is increasing is <b>individual marketing</b>, in which the marketing mix is tailored on an individual consumer basis. While in the past impractical, individual marketing is becoming more viable thanks to advances in technology.
Suitability of Market Segments to the Firm
Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include:
- Whether the firm can offer superior value to the customers in the segment
- The impact of serving the segment on the firm's image
- Access to distribution channels required to serve the segment
- The firm's resources vs. capital investment required to serve the segment
No comments:
Post a Comment