Target Market Definition
A target market consists of different groups of individuals, households, and organizations towards which a company aims to offer its products and services. Businesses can create and implement effective marketing strategies once they know about the needs and preferences of specific clients. It increases sales revenue and market share of the brand.
Businesses must segment consumer groups based on geography, demography, psychography, and purchasing behavior to target a potential market. Even the best marketing efforts will fail and cost time and money to the company if it does not articulate markets. Consumer research and limited product offerings are common ways for brands to evaluate the market and consumer behavior before launching.
Table of contents
- A target market is a specific market segment consisting of different groups of individuals, households, and organizations with select product preferences and budgets and to whom a company wants to offer its goods and services.
- It enables businesses to develop and implement effective marketing plans, acquire new clients and expand in new markets, resulting in increased sales revenueSales RevenueSales revenue refers to the income generated by any business entity by selling its goods or providing its services during the normal course of its operations. It is reported annually, quarterly or monthly as the case may be in the business entity's income statement/profit & loss account. and market share of brands.
- Brands commonly use consumer surveys, market research, competition analysis, and limited product offerings to assess the market and consumer behavior before launching.
- Geographic, demographic, psychographic, and buying habits are examples of target market segmentation.
Understanding Target Market
Target markets are segments of potential customers willing to spend money on products and services. In addition, each customer has a specific product choice and budget. Therefore, the company matches consumer demands with its offerings and develops marketing strategies accordingly. It, thus, enables a business to acquire new clients and expand in new markets, making it a profitable segment.
Companies look up to certain types of clients to ensure increased sales and profits. For example, the target market of Apple, Inc. consists of students, managers, executives, and professionals. They require gadgets and electronic devices for academic and professional purposes.
The 80-20 rule80-20 RuleThe 80-20 rule or Pareto Principle is a phenomenon primarily used in business and economics that explains how 20% of efforts or inputs can yield 80% of results or outputs. It helps identify and focus on the crucial factors to create maximum value while delegating the least important ones. or Pareto Principle plays a crucial role in identifying the target group of customers. It means 20% of customers would lead to 80% of the profit. Hence, a business must try to retain its loyal customers.
Typically, when a company manufactures a product or provides a service, it already knows the types of customers it wants to target. The best strategy for brands to identify their markets is to use the ideal client image existing in their minds.
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Choosing Target Markets: A Step-by-Step Approach
A business must take several actions to attract a specific segment of the market. It is a crucial component of the marketing strategy and impacts the features, price, and distribution of products and services:
- Conduct market researchMarket ResearchMarket research refers to a business strategy wherein an organization analyzes the market trends, competition, and consumer preferences ahead of launching new products or services. It involves collecting and interpreting data during product development or marketing to help businesses make informed decisions. and industry analysisIndustry AnalysisIndustry analysis refers to the analysis of industry’s environment that guides the industry to grow and survive in a competitive environment and gain a competitive edge in the industry as it predicts the future and changes in the market and analyze the threats and opportunities in the way ahead and making decisions and planning according to it.
- Understand customer needs, preferences, and purchase behavior
- Analyze the market competition and product pricing
- Segment the market and create effective market strategies
It is almost impossible to design a marketing plan without identifying the market. And businesses are likely to lose out on the customers they wish to attract. Hence, companies develop a marketing plan based on the articulation of the target group of customers. The majority of them do so after releasing their items into the market. They, nevertheless, should consider planning strategies ahead of time.
The market selection is almost complete once organizations determine why their products are helpful, what benefits they may offer, and whom they will attract.
Types Of Target Market
Businesses must categorize their action areas while segmenting a specific market for their marketing efforts to be effective.
They can only succeed if they correctly classify their target customers in the following four categories:
#1 – Geographic
A business can choose which market to focus on based on the location and type of products and services it provides. This target market segmentation considers that different consumer groups in a geographic area may require specific products or services.
For example, if a company makes waterproof paint that keeps home exteriors safe during the monsoons, locations witnessing heavy rainfall throughout the year would be the best place to market it. Companies can find appropriate locations using the country code, postal code, area code, city, province, state, etc.
#2 – Demographic
A business must research the population before deciding on the ideal consumer group to target. It will allow the company to make well-informed decisions based on correct data. As a result, they can correctly define their markets and target customers of the appropriate age, gender, economic level, race, religion, education, marital status, etc.
For example, if a company sells beer, it should plan its target market strategy for people aging 18 to 50.
#3 – Psychographic
This segmentation considers people’s lifestyle choices in an area where a company intends to run its advertising campaigns and introduce new products. Personality, attitude, interests, values, beliefs, and socioeconomic status are crucial factors to consider when identifying a potential consumer base.
For example, a company planning to launch a pet product knows that its target customers will primarily be upper- and upper-middle-class people. As a result, its marketing efforts would focus on those people as their key clients.
#4 – Behavioral
A business must be aware of facts to determine how well its product would perform in a specific demographic or social setting. Understanding buying habits will let companies know how their products can meet consumer needs, both in terms of features and usability, which are the most critical issues in buying.
Target Market Examples
Let us look at the following target market examples to understand the concept better:
Jane has created stunning jewelry designs and plans to sell a unique collection to ladies in the city. With several competitors already dominating the market, she made every effort to make each design different.
She also conducted social media surveys and introduced promotion schemes before having the designs ready for sale. She observed that the ladies in the town are looking for something different from what others prefer wearing.
After studying the population in different ways, she decided to transform those designs into fine jewelry pieces. In her marketing campaign, she targeted mid-aged women who desire to wear something unique for parties to flaunt their unique jewelry collection.
Her marketing efforts paid off, and sales increased faster than projected.
Targeting a market has never been easier, thanks to technological advancements. Let us take Facebook’s tracking of iOS users’ behavior as an example here.
Retailers run advertising campaigns on the social media platform on behalf of customers. Facebook uses the information gathered from targeted ads to track the buying activities of its clients and identify target customer groups. Based on the purchase behavior, the social networking website helps advertisers determine the specific market segment where customers share similar preferences.
However, in early June 2021, Apple, Inc. released an iOS software update for iPhones that provided customers the choice of whether they would like to be tracked. This iOS App Tracking Transparency feature is believed to severely affect Facebook Inc.’s advertisers and the targeted advertising across the Internet.
Frequently Asked Questions (FAQs)
A target market is a section of the market consisting of groups of individuals, households, and organizations with varying product preferences and budgets and to whom a firm intends to sell its products and services. Businesses segment potential consumer groups based on location, demographics, psychography, and purchasing behavior to target them in a market.
No product is for all. Thus, a business must conduct market research and industry analysis to segment customer groups efficiently. Furthermore, it should recognize the needs, interests, and buying habits, examine market competitiveness, and assess product pricing to identify markets.
The common types of target markets are – geographic segmentation (location-based), demographic segmentation (population-based), psychographic segmentation (lifestyle and socio-economic-based), and behavioral segmentation.
This has been a guide to the target market and its definition. Here we discuss how to choose a target market along with types and examples. You may also have a look at the following articles to learn more –
- Direct MarketingDirect MarketingDirect marketing refers to a marketing strategy wherein businesses use direct channels to communicate their brands with target customers effectively. The most popular communication channels include catalog, fliers, phone call and text, postal and electronic mail, and social media.
- Price TargetPrice TargetPrice Target in the context of stock markets, means the expected valuation of a stock in the coming future and the valuation may be done either by the stock analysts or by the investors themselves. For an investor, price target reflects the price at which he will be willing to buy or sell the stock at a particular period of time or mark an exit from their current position.
- Market DynamicsMarket DynamicsMarket Dynamics is defined as the forces of market constituents responsible for the shift in the demand and supply curve and are therefore accountable for creating and reducing the demand and supply of a particular product.