Target Market Identification - Marketing and Management Models

Target Market Identification

Helen Strong

Segmentation and Estimation

Target Market: Purpose

The target market lies at the heart of any marketing enterprise. One would need to determine the characteristics of the consumer and potential consumers of a product to be able to shape the elements of the marketing mix. Marketers will consider a review or definition of the target market when:

• Launching a product
• Modifying a product or brand
• Changing elements of the marketing mix
• Identifying different trends in consumer behavior
• Evaluating a marketing problem or issue that may have occurred as a result of changing consumer attitudes and use of a product

Target Market: Structure and Description

Taking a step backwards from the problem, the first decision when deciding a target market is to define (as asked in the paper “Marketing myopia” by Theodore Levitt, published in 1960): What business is the organization in?

This is the difference between being an airline in that is just in the air travel business, and being an airline that offers the full spectrum of travel services. The former is looking for passengers for airplanes, the latter is considering whether they want accommodation, hire cars, links to other travel opportunities, and other services connected with travel. As you can see, the entire marketing environment and strategies are affected by the definition of the business.

The target market is an element of strategic marketing and consists of the selected individuals or organizations that the marketer has chosen as the most likely, or perhaps most rewarding, consumers of the product or services offered by the organization. They have a need that the organization can fulfill.

Often the target market is chosen using some form of segmentation, which can be applied using one or more different bases:

• Functionality (consumer units that need the functionality of the product; e.g., if consumers require entertainment—which means they could be considering television, radio, cinema, live shows, clubbing, CDs, games, reading, socializing, and so on)
• Demographics (age, gender, education level, income, job position, geographic area). In some cases, one or more of these factors are emphasized more than others. For example, price of the product may preclude certain sections of the market, or the profession could be the key factor in deciding who is included in the target market.
• Psychographics (interests, core values, attitudes, emotions, and feelings about life and about the product or brand, and what it does for them). For example, in the motor vehicle market self-image may be the segmenting factor. People who want status versus people who are not concerned about prestige but are buying a family vehicle chosen for safety features, or others who require a workhorse.
• Decision criteria (What things do they consider when choosing which brand in the product category? That is: What are their priorities? Are they price oriented?)
• Behavior and buying habits (Do they buy for special occasions? From a small shop, a retail chain, or from a mall? How often do they buy? How do they pay?)

Figure 33.1 Segmentation and target market

The target market model helps to define the variables that define exactly who should be interested in using the product, and to understand the reasons why they choose a particular product or brand (Figure 33.1).

Target Market: Strategic Implications

Under the marketing concept (consumer satisfaction is the aim of organizational endeavor), every single element of the marketing strategy takes the consumers’ needs and behavior into consideration. Hence an accurate description and understanding of the target market consumption drivers will determine the extent and direction of the marketing plan.

Because you understand what the market does and where to find them, such a focus:

• Simplifies finding a relevant positioning since you have knowledge of the target consumers’ needs and desires
• Increases the efficiency of the plan as the content and creative effort are more relevant
• Reduces the cost of marketing (media schedules and distribution efforts are concentrated on reaching the people who are most likely to consume your brand)
• Simplifies the communication message as you are directing the messages to like-minded people who are more likely to understand what the company is saying about the brand and product

Sorenston (2011) mentions the quality of lead generation as an important cost-saving device. When a sales force knows which leads are going to be productive, they can approach them with greater confidence and consistency of message. She also highlights better product development as a major benefit of correct target marketing.

Target Market: Implementation

The steps in choosing a target market include:

1. Before getting bogged down by the details, marketers need to do a broad strokes investigation into the size of the market. How many consuming units (individuals or organizations)? Where are they? What do they spend in the product category? Do you have access to secondary information or do you need to estimate this value?

Total value of the market could be estimated from

C × Fcy × Av spend = total market turnover in period, where C = total number of product users, Fcy = average number of times that they buy per period, and Av spend is the average amount spent per purchase.

Is this figure enough (given that you will only have a share of it) to sustain a marketing effort and provide an acceptable return on investment? Yes? Then carry on.

2. Apply one of the models on market attractiveness. (e.g., GE matrix or Mullin’s seven domains). This is to anticipate the elements that need to be built into the marketing plan.

3. Decide on the demographics, characteristics of the consumers, or both, who should be interested in the product. How does this affect your market size estimates?

4. Check on the size of the selected market. (The size of the market can be specified by the number of consuming units in it, or by the total amount of money that will be spent on the products during a year [say]).

5.    Examine the segments in the market to see if there are any that would be more likely to buy the product or be more profitable to serve. This can be an efficient strategy, since you can use a focused approach when marketing to homogenous segments. Ideal segments result in a group of consumers who are large enough to be measured; and support marketing action. They will have a distinct and sustainable product or service need and the marketer will be able to access them in a defined way.

6.    Decide on which approach seems to offer the best marketing solution for the company. Depending on the outcome of the above process, the nature of the product, and the total number of consuming units, the marketer could elect to follow a mass marketing, differentiated marketing, specialized marketing, or niche marketing strategy.

○    Mass marketing is associated with large markets and relatively inexpensive products.

○    Differentiated marketers distinguish between various segments in a market and adjust the marketing mix to meet the perceived needs of those segments. Here a single segment or differentiated segment marketing strategy could emerge.

○    Specialized marketing and niche marketing are often used for products that have unique benefits, which are relatively pricey, or both. The marketer could choose to specialize in a product class, or perhaps to specialize in the products of a particular industry or market.

7.    Recalculate the viability of the chosen target market. There are a few aspects here.

○    What is the likely market share that your product will achieve?

○    What is the profitability of entering that market? That is, you need to assess the relationship between the amount of money that is obtained in turnover and the amount that it takes to develop and produce the product and bring it to market (i.e., manufacture and then distribute the product or service to the place where the selected consumers will buy it, with appropriate levels of promotion to inform them of availability whilst persuading them to buy it).

○     At what point will you reach breakeven and start turning a profit?

○    The next step is to look at the size of the segments. Again, the researcher asks whether the spend within the segments indicates that mass marketing is the only option, or whether there are viable segments that will warrant a more focussed approach.

Finally the basis for segmentation needs to be confirmed. What type of segmentation is indicated? Which approach will result in a market that will be profitable for the organization? Qualitative research is required to clarify the attributes of the segment, their attitudes, and important buying criteria; how do they judge the product offering? How do they react to the product concept and proposed advertising?

Quantitative research is then necessary to gauge and confirm the size of the various segments in the market and to recalculate the potential turnover, given acceptance of the product positioning and appeal of the brand image.

Target Market: Conclusions

Deciding on a target market requires some effort to obtain information about the consumers and their relationship with the product category. However, there is no doubt that accurate target marketing engenders a more efficient marketing effort. This streamlining then can have a positive impact on sales.

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