Target market
Target market is that segment of the market that is suitable for a company to serve. Without clear definition of target market the marketing plan cannot be implemented properly. Target marketing is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
The best approach for selecting a target market is need based segmentation.
Target marketing involves three steps:
a. Evaluating market segments
b. Selecting target market segments
c. Choosing a targeting strategy.
A. Evaluation criteria for segment:
In evaluating different segments a company must look at three criteria. These are as follows………………
1. Segment size and growth: First the company needs to collect and analyze data regarding segment sales, growth, and expected profitability for various segments. That means the company need to identify the number of customers in each segment, their consumption pattern, growth rate of the market during previous years.
Total consumption = number of people × per head consumption
If total consumption increases in last 10 years hen, the growth rate is increasing. Growth rate below 10% is not very good.
2. Segments structural attractiveness: To evaluate this company needs to analyze the five wings of industry structure. For example:
a. A segment is less attractive if the cost of entry is very high.
b. Some segments become less attractive by the high bargaining power of buyers in that segment. Because buyers with strong bargaining power try to force down the prices and demand more services.
c. Again segments become less attractive if It contains powerful suppliers who can control prices or reduce quality.
d. The existence of many substitutes’ products may limit the prices.
e. A segment is less attractive if contains many strong and aggressive competitors.
3. Company objective and resources: A segment may have a right size and growth and it may structurally attractive but the company cannot choose it before considering its own objectives and resources. Some segment can be dismissed quickly as they don’t match with the company objectives or the company may lack the skills and resources to succeed in that attractive segment. The company should enter into that segment in which it can offer superior value and gain competitive advantage.
