Markets consist of buyers with varying needs and wants in one way or another.
Historically, marketing efforts centered on promoting one product to “everybody” – ‘anybody with a pulse' - I have heard this described as a few times! This way of marketing was eventually discarded by most businesses, largely because one product does not usually suit all needs and wants. Additionally, much money was spent in promoting this one product to lots of customers, many of whom would never buy it. This approach is called mass marketing.
Then a newer type of marketing was adopted, sometimes called product-variety marketing, where manufacturers tried to have a range of products that suited everyone's needs. This fell out of favour because having a product range to include every customer's needs meant large inventory and operational costs. Promotion costs could also be large if all products required individual advertising.
Target marketing then came about; the marketing approach commonly used by most businesses today. This involves finding a group (often more than one group) of customers whose needs and wants could potentially be met by providing a “customized” product. This is where segmentation; the first step in this process, fits in.
Step 1 - Market Segmentation
Market segmentation is the sorting of customers within the market into distinct groups. You can group or segment on various things such as sex, age, family or marital status etc. These are known as demographics. You can also segment based on geography (where they live), income, product usage patterns or even on customer benefits. These segments then need to be profiled for the next stage.
However you segment the market, each segment or group needs to be large enough to support sales of your product. They also need to be profitable to sell to – this can be judged by how expensive these customers are to talk to e.g. the media and promotional costs of reaching them, needs to be weighed up against the sales potential of the segment. The segments or groups also need to be accessible & responsive to communication.
Step 2 – Segment Targeting – which segments are going to be your market?
Targeting is about picking the right groups from your market segmentation that meet your “customer” criteria and then promoting specifically to them. Before deciding on one or more segments as your new target audience(s), you will need to assess these segments for their suitability in regards to providing:
- Sufficient sales volume (units or dollars)
- Adequate profitability
- Accessibility to customers
- Customers able & willing to purchase
- A realistic opportunity to compete against existing competitors
You may need to assess a few segments before you get a suitable match up between your product or service and a suitable target market(s). Targeting, unlike mass marketing, is often a more cost-effective investment in product promotion.
As mentioned, mass marketing is where you try to meet all segments' needs and then advertise to everyone, often wasting a lot of money in communicating with customers who have low or no interest in your product or service. Targeting is a much more efficient way of investing your promotional dollars because they are spent on focusing on the higher potential customers instead of the whole customer universe!
When you get to know about your target audience, then you can find what media they are exposed to, what the latest purchasing trends are in these groups etc. Once you know who you are talking to, you can focus your time and money on getting these customers to buy from you.
After completing this exercise you should be able to clearly understand and document in your marketing plan under ‘Strategy', who your target audience is and any other descriptive details that help pinpoint how to best communicate with them.
Read > Part 2: Marketing Strategy – what are the basics?
© Copyright 2009 – Anne-Marie Watson – Southside Marketing Solutions