A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element to a marketing strategy. The marketing mix variables of product, place (distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace. Market segmentations
Target markets are groups of individuals that are separated by distinguishable and noticeable aspects. Target markets can be separated by the following aspects: • Geographic segmentations, addresses (their location climate region) • demographic/socioeconomic segmentation (gender, age, income, occupation, education, household size, and stage in the family life cycle) • psychographic segmentation (similar attitudes, values, and lifestyles) • behavioral segmentation (occasions, degree of loyalty)
• product-related segmentation (relationship to a product) In addition to the above segmentations, market researchers have advocated a needs-based market segmentation approach to identify smaller and better defined target groups. A seven step approach proposed by Roger Best is as follows: • Select the target audience– the customers are grouped based on similar needs and benefits sought by them on purchase of a product. • Identify clusters of similar needs- demographics, lifestyle, usage behaviour and pattern used to differentiate between segments. • Apply a valuation approach- market growth, barriers to entry, market access, switching, etc. are used. • Test the segments- A segment storyboard is to be created to test the attractiveness of each segment’s positioning strategy. • Modify marketing mix- expanding segment positioning strategy to include all aspects of marketing mix. Strategies for Reaching Target Markets
Marketers have outlined four basic strategies to satisfy target markets: undifferentiated marketing or mass marketing, differentiated marketing, concentrated marketing, and micromarketing/ nichemarketing. Mass marketing is a market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. It is the type of marketing (or attempting to sell through persuasion) of a product to a wide audience. The idea is to broadcast a message that will reach the largest number of people possible. Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience. A differentiated marketing strategy is one where the company decides to provide separate offerings to each different market segment that it targets. It is also called multisegment marketing and as is clearly seen that it tries to appeal to multiple segments in the market. Each segment is targeted uniquely as the company provides unique benefits to different segments. It increases the total sales but at the expense of increase in the cost of investing in the business.
Concentrated marketing is a strategy which targets very defined and specific segments of the consumer population. It is particularly effective for small companies with limited resources as it does not believe in the use of mass production, mass distribution and mass advertising. There is no increase in the total Profits of the sales as it targets just one segment of the market. For sales teams, one way to reach out to target markets is through direct marketing. This is done by buying consumer database based on the segmentation profiles you have defined. These database usually comes with consumer contacts (e.g. email, mobile no., home no., etc.). Caution is recommended when undertaking direct marketing efforts — check the targeted country’s direct marketing laws. Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments.
It can be the key to a small business’s success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities. So if, for instance, I open a catering business offering catering services in the client’s home, instead of advertising with a newspaper insert that goes out to everyone, I could target my market with a direct mail campaign that went only to particular residents. While market segmentation can be done in many ways, depending on how you want to slice up the pie, three of the most common types are: Geographic segmentation – based on location such as home addresses; Demographic segmentation – based on measurable statistics, such as age or income; Psychographic segmentation – based on lifestyle preferences, such as being urban dwellers or pet lovers. Target Market Selection
Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm’s objectives, resources, and capabilities. Attractiveness of a Market Segment
The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment: Size of the segment (number of customers and/or number of units) Growth rate of the segment
Competition in the segment
Brand loyalty of existing customers in the segment
Attainable market share given promotional budget and competitors’ expenditures Required market share to break even
Sales potential for the firm in the segment
Expected profit margins in the segment
Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, salesforce estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable micro-environmental and macro-environmental variables on the market segment should be considered. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition. It may be more profitable to serve one or more smaller segments that have little competition. On the other hand, if the firm can develop a competitive advantage, for example, via patent protection, it may find it profitable to pursue a larger market segment. 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 The better the firm’s fit to a market segment, and the more attractive the market segment, the greater the profit potential to the firm. 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. The following diagrams show examples of the five market selection patterns given three market segments S1, S2, and S3, and three products P1, P2, and P3.
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 individual marketing, 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. Positioning (marketing)
Although there are different definitions of brand positioning, probably the most common is: identifying and attempting to occupy a market niche for a brand, product or service utilizing traditional marketing placement strategies (i.e. price, promotion, distribution, packaging, and competition). Positioning is also defined as the way by which the marketers attempt to create a distinct impression in the customer’s mind. Positioning is a concept in marketing which was first introduced by Jack Trout (“Industrial Marketing” Magazine- June/1969) and then popularized by Al Ries and Jack Trout in their bestseller book “Positioning – The Battle for Your Mind.” (McGraw-Hill 1981) This differs slightly from the context in which the term was first published in 1969 by Jack Trout in the paper “Positioning” is a game people play in today’s me-too market place” in the publication Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted advertising, and has a natural tendency to discard all information that does not immediately find a comfortable (and empty) slot in the consumers mind.
It was then expanded into their ground-breaking first book, “Positioning: The Battle for Your Mind,” in which they define Positioning as “an organized system for finding a window in the mind. It is based on the concept that communication can only take place at the right time and under the right circumstances” (p. 19 of 2001 paperback edition). What most will agree on is that Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company’s management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions. A company, a product or a brand must have positioning concept in order to survive in the competitive marketplace. Many individuals confuse a core idea concept with a positioning concept.
A Core Idea Concept simply describes the product or service. Its purpose is merely to determine whether the idea has any interest to the end buyer. In contrast, a Positioning Concept attempts to sell the benefits of the product or service to a potential buyer. The positioning concepts focus on the rational or emotional benefits that buyer will receive or feel by using the product/service. A successful positioning concept must be developed and qualified before a “positioning statement” can be created. The positioning concept is shared with the target audience for feedback and optimization; the Positioning Statement (as defined below) is a business person’s articulation of the target audience qualified idea that would be used to develop a creative brief for an agency to develop advertising or a communications strategy.
Positioning Statement As written in the book Crossing the Chasm (Copyright 1991, by Geoffrey Moore, HarperCollins Publishers), the position statement is a phrase so formulated: For (target customer) who (statement of the need or opportunity), the (product name) is a (product category) that (statement of key benefit – that is, compelling reason to buy). Unlike (primary competitive alternative), our product (statement of primary differentiation). Differentiation in the context of business is what a company can hang its hat on that no other business can. For example, for some companies this is being the least expensive. Other companies credit themselves with being the first or the fastest. Whatever it is a business can use to stand out from the rest is called differentiation. Differentiation in today’s over-crowded marketplace is a business imperative, not only in terms of a company’s success, but also for its continuing survival. Brand positioning process
Effective Brand Positioning is contingent upon identifying and communicating a brand’s uniqueness, differentiation and verifiable value. It is important to note that “me too” brand positioning contradicts the notion of differentiation and should be avoided at all costs. This type of copycat brand positioning only works if the business offers its solutions at a significant discount over the other competitor(s). Generally, the brand positioning process involves:
1. Identifying the business’s direct competition (could include players that offer your product/service amongst a larger portfolio of solutions) 2. Understanding how each competitor is positioning their business today (e.g. claiming to be the fastest, cheapest, largest, the #1 provider, etc.) 3. Documenting the provider’s own positioning as it exists today (may not exist if startup business) 4. Comparing the company’s positioning to its competitors’ to identify viable areas for differentiation 5. Developing a distinctive, differentiating and value-based positioning concept 6. Creating a positioning statement with key messages and customer value propositions to be used for communications development across the variety of target audience touch points (advertising, media, PR, website, etc.). Product positioning process
Generally, the product positioning process involves:-
1. Defining the market in which the product or brand will compete (who the relevant buyers are) 2. Identifying the attributes (also called dimensions) that define the product ‘space’ 3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes 4. Determine each product’s share of mind
5. Determine each product’s current location in the product space 6. Determine the target market’s preferred combination of attributes (referred to as an ideal vector) 7. Examine the fit between the product and the market.
More generally, there are three types of positioning concepts: 1. Functional positions
Provide benefits to customers
Get favorable perception by investors (stock profile) and lenders 2. Symbolic positions
Belongingness and social meaningfulness
3. Experiential positions
Provide sensory stimulation
Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit analysis. Repositioning a company
Different positioning strategies or themes
1. Attribute positioning: The message highlights one or two of the attributes of the product.
2. Benefit positioning: The message highlights one or two of the benefits to the customer.
3. Use/application positioning: Claim the product as best for some application.
4. User positioning: Claim the product as best for a group of users. – Children, women, working women etc.
5. Competitor positioning: Claim that the product is better than a competitor.
6. Product category positioning: Claim as the best in a product category Ex: Mutual fund ranks – Lipper.
7. Quality/Price positioning: Claim best value for price