Targeting Markets Tutorial

The first few sections of the Principles of Marketing Tutorials have introduced the basic concepts needed as a foundation for building a strong marketing program. In particular, we saw that the essential building blocks for creating a strong marketing program rests with marketing research and a deep understanding of customers. With this groundwork in place, it is now time to turn our attention to strategic decisions undertaken by the marketer to address customers’ needs and help the organization meet its objectives.

As we discussed in the What is Marketing? Tutorial, these decisions include:

  1. Selecting Target Markets
  2. Developing Products/Services
  3. Creating Promotions
  4. Arranging Distribution
  5. Setting Price
  6. Adding Support Services

In this tutorial, we examine decision #1 – how marketers determine which groups of customers to target. This is a critical point in marketing planning since all additional marketing decisions are going to be directed toward satisfying the markets selected.

For those new to marketing, selecting target markets may seem like a relatively easy decision to make. In fact, many inexperienced marketers will simply conclude that “We will just sell to whoever wants to buy.” However, this mindset is both ineffective and inefficient as the marketer is likely to drain resources in their quest to locate those willing to buy. Using a target market approach, an organization attempts to get the most from its resources by following a planned procedure for identifying customers that appear to be the best candidates to respond to the marketer’s message.

Target Markets and Market Segmentation

The markets selected by an organization as the target for their marketing efforts (i.e., target markets) is critical since all subsequent marketing decisions will be directed toward satisfying the needs of these customers. But what approach should be taken to select markets the organization will target?

One approach is to target at a very broad level by identifying the market as consisting of qualified customers who have a basic need that must be satisfied. For example, one could consider the beverage market as consisting of all customers that want to purchase liquid refreshment products to solve a thirst need. While this may be the largest possible market a company could hope for (it would seem to contain just about everyone in the world!), in reality there are no manufactured products that would appeal to everyone in the world since individual nutritional needs, tastes, purchase situations, economic conditions, and many other issues lead to differences in what people seek to satisfy their thirst needs.

Because people are different and seek different ways to satisfy their needs, nearly all organizations, whether for-profits or not-for-profits, industrial or consumer, domestic or international, must use a market segmentation approach to target marketing. This approach divides broad markets, consisting of customers possessing different characteristics, into smaller market segments in which customers are grouped by characteristic shared by others in the segment.

To successfully target markets using a segmentation approach, organizations should engage in the following three-step process.

  1. Identify segments within the overall market
  2. Choose the segment(s) that fits best with the organization’s objectives and goals
  3. Develop a marketing strategy that appeals to the selected target market(s)