Market Targeting: Introduction,

Definition, Procedure and Methods

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Market targeting is a process of selecting the target market

from the entire market. Target market consists of
group/groups of buyers to whom the company wants to satisfy
or for whom product is manufactured, price is set, promotion
efforts are made, and distribution network is prepared.

Introduction:

A company cannot concentrate on all the segments of the market. The

company can satisfy only limited segments. The segments the company wants
to serve are called the target market, and the process of selecting the target
market is referred as market targeting. Market segmentation results into
dividing total market into various segments or parts.

Such segments may be on the basis of consumer characteristics or product

characteristics or both. Once the market is divided into various segments, the
company has to evaluate various segments and decide how many and which
ones to target. It is simply an act or process of selecting a target market.

Definitions:

Market is segmented using certain bases, like income, place, education, age,
and life cycle, and so on. Out of them, a few segments are selected to serve
them. Thus, evaluating and selecting some market segments can be said as
market targeting. The quoted definitions are not available.
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However, we can define the term as:

1. We can define the term as: Market targeting is a process of selecting the
target market from the entire market. Target market consists of group/groups
of buyers to whom the company wants to satisfy or for whom product is
manufactured, price is set, promotion efforts are made, and distribution
network is prepared.

2. It involves basically two actions – evaluation of segments and selection of

the appropriate market segments. In this relation, market targeting can be
defined as: Market targeting is an act of evaluating and selecting market
segments.

3. Finally, we define market targeting as: Market targeting consists of dividing

the total market into segments, evaluating these segments, and selecting the
appropriate segments as the target market.

Procedure of Market Targeting:

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Market targeting procedure consists of two steps:

1. Evaluating Market Segments:

Evaluation of market segments calls for measuring suitability of segments.

The segments are evaluated with certain relevant criteria to determine their
feasibility.
To determine overall attractiveness/suitability of the segment, two
factors are used:

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i. Attractiveness of Segment:

In order to determine attractiveness of the segment, the company must think

on characteristics/conditions which reflect its attractiveness, such as size,
profitability, measurability, accessibility, actionable, potential for growth,
scale of economy, differentiability, etc. These characteristics help decide
whether the segment is attractive.

ii. Objectives and Resources of Company:

The firm must consider whether the segment suit the marketing objectives.
Similarly, the firm must consider its resource capacity. The material,
technological, and human resources are taken into account. The segment must
be within resource capacity of the firm.

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2. Selecting Market Segments:

When the evaluation of segments is over, the company has to decide in which
market segments to enter. That is, the company decides on which and how
many segments to enter. This task is related with selecting the target market.
Target market consists of various groups of buyers to whom company wants to
sell the product; each tends to be similar in needs or characteristics. Philip
Kotler describes five alternative patterns to select the target market. Selection
of a suitable option depends on situations prevailing inside and outside the
company. 

Alternative Strategies (Methods) for Market Targeting:

Basically five alternative patterns/strategies are available.

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Company may opt for any one of the following strategies for
market targeting based on the situations:

1. Single Segment Concentration:

It is the simplest case. The company selects only a single segment as target
market and offers a single product. Here, product is one; segment is one. For
example, a company may select only higher income segment to serve from
various segments based on income, such as poor, middleclass, elite class, etc.
All the product items produced by the company are meant for only a single
segment.

Single segment offers some merits like:

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(1) Company can gain strong knowledge of segment’s needs and can achieve a
strong market position in the segment.

(2) Company can specialize its production, distribution, and promotion.

(3) Company, by capturing leadership in the segment, can earn higher return
on its investment.

It suffers from following demerits like:

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(1) Competitor may invade the segment and can shake company’s position.

(2) Company has to pay high costs for change in fashion, habit, and attitude.
Company may not survive as risk cannot be diversified.

Mostly, company prefers to operate in more segments. Serving more segments

minimizes the degree of risk.

2. Selective Specialization:

In this option, the company selects a number of segments. A company selects

several segments and sells different products to each of the segments. Here,
company selects many segments to serve them with many products. All such
segments are attractive and appropriate with firm’s objectives and resources.

There may be little or no synergy among the segments. Every segment is

capable to promise the profits. This multi-segment coverage strategy has the
advantage of diversifying the firm’s risk. Firm can earn money from other
segments if one or two segments seem unattractive. For example, a company
may concentrate on all the income groups to serve.

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3. Product Specialization:

In this alternative, a company makes a specific product, which can be sold to

several segments. Here, product is one, but segments are many. Company
offers different models and varieties to meet needs of different segments. The
major benefit is that the company can build a strong reputation in the specific
product area. But, the risk is that product may be replaced by an entirely new
technology. Many ready-made garment companies prefer this strategy.

4. Market Specialization:

This strategy consists of serving many needs of a particular segment. Here,

products are many but the segment is one. The firm can gain a strong
reputation by specializing in serving the specific segment. Company provides
all new products that the group can feasibly use. But, reduced size of market,
reduced purchase capacity of the segment, or the entry of competitors with
superior products range may affect the company’s position.

5. Full Market Coverage:

In this strategy, a company attempts to serve all the customer groups with all
the products they need. Here, all the needs of all the segments are served.
Only very large firm with overall capacity can undertake a full market
coverage strategy.

Methods of Full Market Coverage:

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Philip Kotler identifies two broad ways for full market coverage
strategy as under:
Undifferentiated Marketing:

Company sells the same products to all the customer groups. It does not
consider difference among buyers. Product and marketing programme remain
common for all the segments. The firm relies on mass production, mass
distribution, and mass advertising. So, it can considerably reduce production,
distribution, and promotional costs. Similarly, reduced costs result into low
price and the price-sensitive consumers can be attracted. This method is
followed by pharmaceutical companies.

However, many experts and practicing managers have expressed strong

doubts about the strategy. It is erroneous to believe that all the segments have
similar needs. It is a rare case. Such strategy may invite competition to serve
larger groups of buyers, and smaller groups are neglected. People, in different
segments, differ significantly in terms of needs, preference, and advertising
appeal.

Differentiated Marketing:

Here, company operates in several segments and designs different marketing

programmes for each of the segments. Various groups of customers are
targeted by several types of products and marketing strategies. It is based on
the notion that each group needs different products. This strategy is used by
the most of automobile companies. This strategy creates more total sales, but
costs of doing business also on increase.

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Following costs are likely to be higher in differentiated marketing

strategy:
i. Marketing research cost

ii. Administrative costs

iii. Manufacturing costs

iv. Inventory costs

v. Promotional costs

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vi. Product modification costs

Here, costs and sales both increase. So, profitability is doubtful. However, it is
less risky. Loss in one segment can be offset against profitable segments. Most
of companies prefer this option. Thus, market targeting is an essential aspect
of marketing programme. A manager needs a lot of experience, knowledge,
and expertise to take decision on target market. The alternative to be used
depends upon a large number of internal and external variables. Careful and
objective analysis of these variables can assist in selecting target market.