Directing a company’s effort towards serving one or more groups of customers sharing common needs or characteristics. The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter is called Targeting.
Evaluating and Selecting Target Markets
Segment Attractiveness
The company must first collect and analyze data on current sales value, projected sales-growth rates and expected profit margins for the various segments. Segments with the right size and growth characteristics are interesting. But ‘right size and growth’ are relative matters. Some companies will want to target segments with large current sales, a high growth rate and a high profit margin.
Business Strengths
The company must consider its objectives and resources for that segment. It is best to discard some attractive segments quickly because they do not mesh with the company’s long-run objectives. Although such segments might be tempting in themselves, they might divert the company’s attention and energies away from its main goals. They might be a poor choice from an environmental, political or social-responsibility viewpoint.
Segment Strategy
After evaluating different segments, the company must now decide which and how many segments to serve. This is the problem of target-market selection. A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
Undifferentiated Marketing
A market-coverage strategy in ‘which a firm decides to ignore market segment differences and go after the whole marker ‘with one offer. The offer will focus on what is common in
the needs of consumers rather than on what is different. It relies on quality, mass distribution and mass advertising to give the product a superior image in people’s minds. Undifferentiated marketing provides cost economies. When several firms do this, there is heavy competition in the largest segments and neglected customers in the smaller ones. The result is that the larger segments may be less profitable because they attract heavy competition
Differentiated Marketing
A marker-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. General Motors tries to produce a car for every ‘purse, purpose and personality’. By offering product and marketing variations, it hopes for higher sales and a stronger position within each market segment. GM hopes that a stronger position in several segments will strengthen consumers’ overall identification of the company with the product category. It also hopes for greater repeat buying because the firm’s offer better matches the customer’s desire.
Concentrated Marketing
A market-coverage strategy in which a firm goes after a large share of one or a few submarkets. For example, Oshkosh Trucks is the world’s largest producer of airport rescue trucks and front-loading concrete mixers. Recycled Paper Products concentrates on the market for alternative greeting cards, and Ecover concentrates on a narrow segment of environmentally friendly detergents.
