Target market and market segmentation refer to breaking a market into several segments then find the segments that hold the potential customers and create values for the targetted customers. Target market and market segmentation are so important that it’s often recommended to start before even setting up the business! The process is the key to build a new product/service, increase sales & make the business profitable.
But before digging any further on the topic, what is market segmentation and target marketing?
Segmentation, targeting, and positioning, together known as the STP process. Segmentation groups customers based on their needs and then find common characteristics of the group/segment. Supposed you have an automotive business, your customer can be segmented in to 2 possible categories, one is price sensitive and another segment is price insensitive. Segmentation can be done based on several other metrics such as:
- Income level
- Marital status
- Region or country
- Social status
- Occupation and the lists go on.
Now since you know the segmentation, you can target a specific segment based on your product. Targeting is the 2nd step which is very crucial. If your supposed automotive company builds luxurious vehicles then focus on the price-insensitive section and if the product is a budget orientated vehicle then focus on the other segment.
The last step is positioning which we will discuss in future articles.
Understanding the term Market to segment and target
In order to understand market segmentation & target market process properly, we have to understand the term market properly. A market is a place where you will find different kinds of buyers in a group. They can have the same needs but 99.99% of the time, they will have different needs and demands. The key points here, if they don’t have the purchasing power to fulfill the demand or want, this group won’t be called a market. You have to remember that this “market” can be a group of individuals, businesses, or organizations with common or general demands/needs & your product or service should address it.
Now you know what is the market for your product, let’s discuss how to do the market segmentation and target market.
We have a highlighted what is market segmentation and target market in this article. Let’s learn how to do that effectively.
We already know that market segmentation can be done based on several metrics such as
- Geography: Location, country, region, etc
- Demographics: Age, education, income, etc
- Psychographics: Lifestyle, Social status, etc
- Behaviors & others: Trend, choices, loyalty, purchase occasion, convenience, etc.
So the common and easy way to segment your potential customers is to find & segment based on the above-mentioned metrics. But to do it perfectly you have to ask 3 questions known as,
- Why question
- What question &
- Who question
Why question answers any previous purchase of target customers and also predicts any future purchases. By gathering these data a company can target the best potential customers.
Now you know that the potential customers have previous purchase history, we have to ask the 2nd question which is the What question. We have to find the purchase amount, frequency & recency of that purchase. Why, because these 2 data will answer the last time customer has made a purchase, how frequently he visits the store (online or physical) & how much money he/she has used to purchase.
The last question is Who question that actually finds the identity of the target customer. Who question provides personal information like age, family status, income, etc. Actually, this is the most important data among all. Now think that you are the same automobile owner and who questions gives you some answers which suggest that the target customer is aged above 40, has a family. Based on the answers you will offer him an SUV instead of a 2 seater car right?
This is how actually big companies like Facebook & Google earn the money. They have all the necessary information of us regarding the Why, What & Who questions and can create a proper mapping of a potential customer easily.
How to focus on the target market:
There is no single product that can fulfill the demand of an entire market. There is always a user base of iPhone though the phone is very costly comparing the other products in the market. And there will be customers for cheaper but stronger phones like 1+ brand. It’s the constant for any market. Though it is possible to get the major share of a market, there is no single product that can be an ideal fit for the entire market.
So there will be a difference in demands and with proper market segmentation knowledge, successful marketers target the best suitable group for their product. This very group is the target market or also known as TG of this product.
Another great example of the target market is the young generation. The young generation has a tendency of spending more time in the digital realm. Suppose you are going to introduce a fashion brand and you have segmented that youth will be your target audience. Now if you use digital channels for your branding, chances are you are not going to attract more customers to your brand. So to target a market, we also have to find this information.
To better utilize the marketing resource, market segmentation and finding the target market are very important. It will more effective since the market will be defined. Without proper market segmentation and target market, the marketing process will be aimless and lose its impact. Resources will be spent behind the segment which maybe not even interested in the product.
Thank you for reading my blog, I have also used the above-mentioned technique here. I have segmented and targeted you as my potential reader and look you are still reading! Market segmentation and Target Market actually dictate how a company is going to do in the future. Without knowing the answers, you may feel lost in the marketing wilderness.