Selecting a Target Market

Businesses earn profits by selling goods or providing services. It would be nice if everybody in the marketplace was interested in your product, but if you tried to sell it to everybody, you’d probably spread your resources too thin. You need to identify a specific group of consumers who should be particularly interested in your product, who would have access to it, and who have the means to buy it. This group represents your target market, and you need to aim your marketing efforts at its members.

Market Segmentation ^[1]

Identifying Your Market

Suppose you are selling automotive detailing products. Is your target “anyone with money to pay for your product?” Or are you focusing your efforts on a tightly defined market segment of people with an identified need for what you are selling? “Anyone with money” is such a broad audience that it’s difficult to make any impact at all with your marketing efforts or convince very many people that they need your product.  If you narrow and carefully define your target market, though, your efforts will be more fruitful because they’re focused on people with a preexisting need or interest in what you offer.

Identify the Customer Need You Address

To define your total market, start by stating the needs you will fulfill: Who are your products or services intended for? Who do you want to do business with? What is unique about your product? If you’re selling products used in automotive detailing, your total market consists of vehicle owners—that is, all the people who could potentially buy your product. Your business will help them keep their vehicles clean and shiny.

Segment Your Total Market

Next, break down this large market into smaller sections, using a process known as segmentation. You can use a variety of approaches to segment your total market into groups with common wants or needs. In this case, we can segment by vehicle ownership and related behavior. Specific segments might include the following:

• People who restore classic automobiles.
• People who drive old clunkers and run them through the car wash occasionally.
• People who own “status” cars.
• Truck drivers.
• Motorcycle owners.

Which of these subgroups are likely to be your most productive market segment(s)? You recognize that auto owners who don’t care about keeping their cars clean and shiny probably won’t be very interested in your products. Then some care, but they lack the time and interest to do the work themselves. They take their vehicle to a shop. Others only worry about auto detailing when it’s time for a trade-in.

You reject these segments as unsuitable for your target market because they probably do not care enough about what you offer. After further consideration and research, you decide that your market segment will be automobile owners who have both the time and the interest to do their own detailing work—people who enjoy puttering with their vehicles, who have the time to spend, and who take pride in their vehicle’s appearance.

Profile Your Total Customer

Next, develop profiles of your target customer(s) to get a true picture of the people you’re trying to serve. Describe these potential customers as fully as you can. Who will actually buy your product? What do you know about them? Where do they live and what languages do they speak? How much do they spend on car detailing? Where do they shop? What is their annual income? What kinds of cars do they drive? If you’re selling online, what methods do they prefer for online payment? What  Web sites do they visit? How do they want their product delivered?

The study of buyer behavior helps marketing managers better understand why people make purchases. To identify the target markets that may be most profitable for the firm, marketers use market segmentation, which is the process of separating, identifying, and evaluating the layers of a market to identify a target market. For instance, a target market might be segmented into two groups: families with children and families without children. Families with young children are likely to buy hot cereals and presweetened cereals. Families with no children are more likely to buy health-oriented cereals. Cereal companies plan their marketing mixes with this difference in mind. A business market may be segmented by large customers and small customers or by geographic area.

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age, marital status, gender, ethnic background, income, occupation, and education.

Age, for example, will be of interest to marketers who develop products for children, retailers who cater to teenagers, colleges and universities that recruit students, and assisted-living facilities that promote services among the elderly. W Network targets female viewers, while TeleLatino Network (TLN) targets Spanish-speaking viewers. When Mazda Canada offers recent college and university graduates a $400 bonus toward leasing or buying a new Mazda, the company’s marketers are segmenting the market according to education level.

Geographic Segmentation

Geographic segmentation—dividing a market according to such variables as climate, region, and population density (urban, suburban, small-town, or rural)—is also quite common. The climate is crucial for many products: try selling snow shovels in Hawaii or above-ground pools in the Yukon. Consumer tastes also vary by region. That’s why McDonald’s caters to regional preferences, offering poutine at Canadian locations, whereas in the United States, you can get a breakfast of Spam, sausage, and rice in Hawaii, lobster rolls in New England, and country ham, biscuits and gravy in the southern states. Outside of North America, menus diverge even more widely. You can get a McPaneer Royale in India, Mozzarella Dippers in the UK, a prawn burger in Singapore, and gazpacho in Spain.

Likewise, differences between urban and suburban life can influence product selection. For example, it’s a hassle to parallel park on crowded city streets. Thus, Toyota engineers have developed a product, especially for city dwellers. The Japanese version of the Prius, Toyota’s hybrid gas-electric car, can automatically parallel park itself. Using computer software and a rear-mounted camera, the parking system measures the spot, turns the steering wheel, and swings the car into the space (making the driver—who just sits there—look like a master of parking skills). After its success in the Japanese market, the self-parking feature was brought to the United States.

Behavioural Segmentation

Dividing consumers by such variables as attitude toward the product, user status, or usage rate is called behavioural segmentation. Companies selling technology-based products might segment the market according to different levels of receptiveness to technology. They could rely on a segmentation scale developed by Forrester Research that divides consumers into two camps: technology optimists, who embrace new technology, and technology pessimists, who are indifferent, anxious, or downright hostile when it comes to technology.

Some companies segment consumers according to user status, distinguishing among nonusers, potential users, first-time users, and regular users of a product. Depending on the product, they can then target specific groups, such as first-time users. Credit card companies use this approach when they offer frequent flyer miles to potential customers to induce them to get their credit cards. Once they start using it, they’ll probably be segmented according to usage. “Heavy users” who pay their bills on time will likely get increased credit lines.

Psychographic Segmentation

Psychographic segmentation classifies consumers based on individual lifestyles as they’re reflected in people’s interests, activities, attitudes, and values. Do you live an active life and love the outdoors? If so, you may be a potential buyer of hiking or camping equipment or apparel. If you’re a risk taker, you might catch the attention of a gambling casino. The possibilities are limited only by the imagination.

Clustering Segmentations

Typically, marketers determine target markets by combining, or “clustering,” segmenting criteria. What characteristics does Starbucks look for in marketing its products? Three demographic variables come to mind: age, geography, and income. Buyers are likely to be males and females ranging in age from about twenty-five to forty (although college students, aged eighteen to twenty-four, are moving up in importance). Geography is a factor as customers tend to live or work in cities or upscale suburban areas. Those with relatively high incomes are willing to pay a premium for Starbucks specialty coffee, so income—a socioeconomic factor—is also important.

Clustering Segmentations

Now that you have fully identified your target market, research to verify that there will be enough business in this group to support your company in its growth. This process confirms that the need actually exists and that it’s not just wishful thinking on your part.

It is important to use both primary and secondary sources in your research. Primary market research, also known as field research, involves the gathering of new data that does not already exist. This type of research is often conducted by businesses or marketers who aim to gather insights specifically tailored to their current needs or objectives. This could be to understand customer attitudes toward a new product, to gauge customer satisfaction, to determine the effectiveness of marketing strategies, or for various other purposes.

Primary market research provides several advantages. Since it’s tailored to the specific research needs of the organization, it can provide precise, targeted insights that are not available from secondary sources. Furthermore, primary research data is exclusive to the organization that collects it, offering a potential competitive advantage. However, primary research also has its disadvantages. It can be expensive and time-consuming to conduct, especially if a large sample size is needed for statistical significance. It may also require specific expertise to design the research, collect the data, and analyze the results effectively.

Despite these challenges, primary market research is an essential part of effective marketing. It provides valuable, specific insights that can help businesses understand their target market, refine their marketing strategies, and make informed decisions. It’s often used in conjunction with secondary research to provide a comprehensive understanding of a market or business problem.

Secondary market research, often referred to as desk research, involves the use of existing resources or data already collected by others to gather information. This type of research can be an important part of a company’s marketing strategy, providing insights into market trends, consumer behavior, competitive landscape, and other factors that could influence the success of the company’s products or services.

There are numerous sources of secondary data, including public sources like government databases and reports, commercial sources like market research reports from companies like Nielsen or Euromonitor, and internal sources like a company’s own sales data or customer database. Secondary data can also be found in academic journals, newspapers, trade publications, and increasingly on social media and other digital platforms.

Secondary market research offers several advantages. It is often less expensive and quicker to gather than primary research, which involves collecting new data directly from sources like surveys or interviews. Secondary research can also provide a broad perspective on a market, based on data collected from a large number of sources or over a long period.

However, secondary market research also has limitations. The available data may not fit the exact needs of the research, it might be outdated, or its accuracy might be questionable, especially if the source or methodology used to collect it is not reliable. Moreover, secondary data is available to everyone, including competitors, so it may not provide the competitive advantage that unique, primary research could provide.

Despite these limitations, secondary market research is a crucial tool in a marketer’s toolbox. It can provide valuable context and background, help to identify gaps or opportunities in the market, inform the design of primary research, and support strategic decision-making. It’s often the starting point for developing a comprehensive market research plan and complements the insights gained from primary research.