The effectiveness of a business lies primarily in its ability to meet the key needs of customers. However, customers are characterized by different needs and tastes, and this necessitates the definition of a target market.
What is the target market? The target market is a potential market that consists of homogeneous groups of consumers who have the same reaction to the product (service) offered and a set of marketing incentives, i.e. it is the market to which the company targets its activities. It is possible to determine the target market with the help of market segmentation. Market segmentation is a division of the market into homogeneous segments (areas) on various attributes. Thus, the market segment is a defined set of consumers with similar preferences. The main purpose of market segmentation is to determine the group of consumers whose demand the company can meet better than others, both in the short and long term.
Correct definition of the target market has the following advantages:
– by clearly establishing its niche, the company can gain share in a competitive market;
– increase sales of products (services) which are already available in the market, but do not meet expectations because of the lack of a target marketing strategy;
– differentiate the brand from competitors and create brand loyalty;
– to create a stable consumer audience;
– optimize costs for promotion by reducing the cost of non-core marketing operations.
For better understanding of the process of market segmentation we will present its main stages in table 1.
Table 1 – The main stages of the market segmentation process
| Segmentation | Target segment selection | Positioning |
| Determination of segmentation criteria | Segment size estimation | Identification of key consumer needs in the segment |
| Search for segments and market niches | Segment capacity assessment | Developing a positioning strategy |
| Description of segments and market niches | Development of segment goals | Developing a marketing plan for each segment |
The market segmentation process begins with the selection of segmentation criteria (e.g. geography, demographics, attitude towards the product, etc.). The market segment is determined on the basis of the principles shown in Figure 1.
Figure 1 – Criteria for Determining the Market Segment
The most important process is the division of the market into segments, because the more accurate the analysis, the more market niches can be identified, and the more likely the formation of a strong and sustainable market position.
The market segment description includes answers to such questions as:
– number of players present in the segment, brands;
– main quality requirements and functional characteristics;
– sustainable consumption habits;
– consumer behavior when choosing, buying or using the product;
– price sensitivity;
– price limits;
– product satisfaction;
– the most prominent representatives of the segment and their description.
When choosing a target market it is very important not to make a mistake, so it is necessary to collect more detailed and accurate information, because the results of the analysis, as well as further decisions depend on it. The size of the segment can be determined based on the calculation of the market capacity. Once the target segments are chosen, it is necessary to develop goals for each of them, a strategy and a marketing plan. As for market segmentation strategies – they can be as follows:
– concentrated strategy, i.e. one product or a series of almost identical products are focused on one segment, such a strategy requires the creation of a strong brand;
– assortment strategy – offering consumers different products to choose from within a single segment, but in this case there is a risk that stronger players enter the market;
– differentiated strategy – the company focuses on several segments and offers different products to consumers, this strategy allows to reduce risks and increase sales.
Don’t stop there, people change and change their preferences, new products, new brands appear, so you need to be constantly informed about your customers and the market situation. Success to you in defining your target market!
