Target Market Selection: An Easy Guide (2021)

Introduction

Target Market selection is a term that is more often than not, associated with new product development and launches. It is an important stage of the product or service launch as it sharpens the marketing strategy contributing to the success of the product or service in the market. It involves evaluating how lucrative various segments in the marketplace are, and which segment will give the best return of investments and time it takes to penetrate the market to a significant extent.

Target Market selection is an activity that comes right after the business has segmented its market, has already analyzed the consumer, and divided them into broad categories. At the market selection stage, the business has to select the most lucrative market for better margins and long-term sustainability based on the size and growth of a particular segment. Competition in the market cannot be ignored as well. The success of your product significantly depends on how the given market is shared among competitors and whether you can break into their market share, and the strategies the competition will employ to tackle your new product in the marketplace.

Two important factors that impact the selection of the right target market are

A) Attractiveness of a given market segment and how closely it maps to the business’s objectives, capabilities, and resource at hand.

               When evaluating the attractiveness of a given market or market segment, there are a few aspects you should consider.

• Size of the market or market segment. For example, if the market segment is the college-going student’s group, the market size based on demography and geography, will be 20 million in the United States.
• The growth rate of the market or market segment. This gives visibility to how quickly your business needs to scale to the growth rates of the market so you don’t lose the market share to other players. Usually translates into awareness campaigns and advertisements over a sustained period.
• Segment competition. A very important factor that cannot be taken lightly. You have to be on top of the capabilities of the competition and the strategies they are capable of, so you get to do one better than them if not less, of course, based on your own business’s capabilities.
• Brand loyalty. If you enter a market that is high on brand loyalty, it will be a challenge to get new consumers hooked on to your product, unless you have the confidence in the uniqueness and ability of your own product.
• An estimate of attainable market share given your own budget constraints and how much the competition can spend.  Quarterly targets can be decided to meet overall financial targets.
• Decide on what should be the required market share to break even on investment into the product line.
• Self-assessment of your business’s capability in establishing a hold and securing significant enough market share. An honest assessment of your business’s capability will a long way in attaining success and long-term sustainability.
• Your current liability and hunger for expansion will drive your margin expectations. But the margin is also a function of competitive pricing, you should find the thin line between the two for optimal gains.

Tools used to gain this knowledge is what Market Research and Analysis encompasses.

B) How suitable is the market segment to the business’s own long term objectives and goals.

               The business should also research and understand if the market or market segment being looked at aligns well with its own objectives, capabilities, and resources.

• The business should assess if the product on offer adding superior value or filling in a significant gap in the market.
• Will the business and its products be negatively or positively impacted by its foray into the new market segment.
• The business will have to assess if it will be able to be nimble and scale up or down basis the demand and how well is their distribution channel ready to take the new launch.
• Capital investment should be assessed against the business’s current resources and liabilities.

Strategies for Target Market Selection

While there are many strategies that can be applied to the selection of the target market, here are some of the most common and intuitive ones.

• Single-segment: All your resources on new product launches are focused on one market segment, typically backed up by a very detailed and well-defined market segment. Small businesses with their limited resources often opt for this strategy.
• Selective-specialization: In this case, different marketing mixes are served to different market segments, a multiple segment strategy that markets the same product via different distribution channels and suitable promotional messages for respective segments.
• Product-specialization: A single product line specialization tailoring it to various market segments.
• Market-specialization: The business could choose to serve the market segment with various product offerings covering various features that are a requirement in the market segment.
• Full-market coverage: Something that businesses with firm capital backing and long-standing in the industry take to capture most of the new market mostly offering a differentiated marketing mix for different market segments. Sometimes a single undifferentiated marketing mix is offered to all market segments selected.

Businesses should also conduct a study of some other important factors before deciding on the market or market segment they want to play in.

• They should understand the lifestyle of the consumers they are creating the product for. This also in some ways determines how loyal the consumers are to a brand or product. If the products in the segment do not enjoy a great brand following, the business should make necessary adjustments in the allocation of funds in the exercise of creating a brand value.
• The demographic of the consumers. Age, of all the factors, is a key factor that for the most part, decides the marketing strategy of the product. Business cannot market the same product in many cases to people of all age groups, they have different expectations and needs.
• The income of consumers and their spending power. Interrelated to the age factor, consumers in a certain age bracket tend to spend a lot more on certain products and brands than others. As an example, the college-going group will be much more into fashion than the working class.
• Gender is a major factor in selecting the target market or market segment. Businesses may choose to employ the same product with different ad campaigns and promotional messages for different genders.

For example, take bathing soap. Now there are different reasons why soap or bathing soap appeals to different people. Let’s list the most common.

Some use it for its mundane purpose, to take bath, but they also might associate it with the feeling of freshness or the after-bath fragrance. Choice of the brand might depend on the kind of fresh fragrance a soap might be able to give off after a bath.

Some use it as protection against germs and infections. So the fragrance does not really matter and hence the decision of picking up soap from a store shelf often revolves around what is printed on the soap or what was promoted in an ad campaign.

Some for fairness and clear skin. Again the decision of a consumer to pick up the soap from the store shelf depends on whether the product description and its ad campaign have indicated anything to this effect and how effectively it has done so.

In many cases, the product is the same but the needs of the individuals are different. Let’s now define the target audience.

Target Audience 1

Fragrance and body odor specific- Soaps with lasting fragrance. From our experience, we know the below professionals will need something like this for their daily use.

• Marketing professionals.
• Public commuters
• Sales and medical representatives.

Target Audience 2

Soaps with medicinal properties for fighting germs and infections.

• Hospital staff
• Individuals working in conditions that carry different infections.

Target Audience 3

Soaps with beauty-enhancing properties.

• College going students
• Teenagers

Target Audience 4

Age enhancing soaps.

• Middle-aged group, mainly women folks.

Now you could have a product that works for one or more target audiences but you definitely cannot market it the same way. You would have to have targeted and specific promotional messages even if you combine two or more target audiences. A teen cannot be targeted along with people over 50 yrs.

So there you have it, a brief discussion about Target Market selection. For more information please go through this informative article

Happy product launch.

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Also, Read

The Importance of Market Segmentation