Marketing is an important function that plays a vital role in the running of the business. If the product is not marketed in the right manner and fails to reach the end customer, the business will fail. This is why, marketing strategies play crucial roles. While marketing a product, the company has to decide a target market. Target market is nothing but that specific set of audience to whom the product manufactured is meant to cater to. Target market is more like dividing the vast sea of customers into smaller segments and using the 4Ps of marketing (Product, Price, Place and Promotion) on this segment effectively to achieve maximum sales and profits. Target marketing strategy helps tap that subset of the customer population that are most likely to purchase and use the product.
How to Identify a Target Market
The whole concept of target marketing stems down from the fact that we cannot please everybody! Target market, unlike mass marketing does not dole out a single product to the entire market. Instead it marks out a specific range of people to whom the product must be effectively marketed to. As a marketing professional one needs to identify the target market correctly and tap as much profit as possible. To identify the target market one will have to look at the product being manufactured and sold. Ask a few questions:
▲What does this product do?
▲ Who is it helpful to?
▲ Which regions of the world will accept this product?
How to Divide the Market into Segments
To target a particular sector, the entire market has to be first divided based on different criteria. This can be done in the following ways:
Demographic Segmentation: This segment involves categorization of customers based on factors such as age, income, family size, gender, education, nationality, race, etc.
Geographical Segmentation: As we already read above, segmentation based on the region is important while dealing with specific products like desert coolers, fur coats, blankets, snow boots, raincoats, etc., the climatic conditions will determine one's target area.
Behavioral Segmentation: This form of segmentation clubs factors like brand loyalty and value of quality. For example, several IT companies market their products specifically to customers loyal to their products. Then again, certain companies target their high scale products to people who cherish, value and are ready to shell out extra cash for valuable pieces.
Psychographic Segmentation: This type of categorization involves clubbing of people's interests, lifestyles and personalities.
Technographic Segmentation:This type of segmentation differentiates people based on technology they use. With technology becoming such an ingrained part of our lives, technographic segmentation becomes all the more important.
These five types of segmentation are only the broader approach to slicing a market into segments. Even when you consider demographically, within it, one will again have to segment the market. Most marketers use a combination of these kinds of segmentation to narrow down on the most effective target market.
Let's consider some simple examples:
Low waist jeans: The product is catering to the fashion taste buds of the young, teenage generation. Thus, the target market would be based on the age group ranging from 14-25 years of age. Besides demographic segmentation, one will also have to consider geographic segmentation, because not all countries will accept this product. The Arab countries have a strict dress code and such products will not sell there.
Cosmetics: Cosmetics are gender-based, exclusively for men or women, thus, segmentation based on gender will have to be done. However, just dividing the market on the basis of gender is not enough. Lifestyles of men and women come into play, because cosmetics come in all ranges and thus depending on the cost of the product, it will require psychographic and behavioral segmentation.
Desert Coolers: If your company is selling desert coolers, it is but obvious that the target market will be extremely hot regions of the world and not the cold regions.
Baby Products: Marketers selling baby products have to segment their market in terms of age group, but they also have to consider physchographic segmentation, because sales will depend on the lifestyle of the parents. If the parents have a lavish lifestyle, they will agree to spend money on high-end baby products.
Hand-Crafted Bufori Cars: Now, if you are dealing with such high-end cars like hand-crafted Bufori, you cannot market it to everybody. It has to be divided on the basis of psychographic and behavioral segmentation. Geographic segmentation has to be considered as well, because economically backward or developing countries won't have people willing to shell out a fortune on such luxury products. One will have to identify the filthy rich and market it to them.
Something else that should be done before selecting a target market is cohort marketing. Cohort analysis or marketing is something that is extremely useful for existing businesses that are aiming at greater sales. It involves the analysis of the customer base and finding the common thread between them. It is something that identifies the common experiences shared by people in a particular group. However, cohort analysis requires a good balance of data to identify the common factor.
TESCO's Target Marketing Strategy
Target marketing is not confined to just new entrants, but is also important for growth of existing business. Let's take the example of Tesco's South Korean chain of stores, Homeplus. Being the second-largest retail chain in South Korea (after E-mart), Tesco's Homeplus was doing well, however, they wanted to be the number 1 retail chain. So what measures did they take to achieve their goal?
Increase sales and profits
Seoul, South Korea office of marketing firm Cheil Worldwide conducted a study on South Koreans and found a majority of people came under the working class, who though had money, had less time on their hands. They also found out that this working class of people found the weekly task of grocery shopping cumbersome. Their research also revealed how commuters wished they could spend the time waiting for their trains more effectively.
The South Korean busy, working class
Probable Marketing Strategy
To increase sales, the logical decision would be to increase the number of stores, where customers can come to the nearest outlet and shop. However, this would involve a lot of money. Online marketing was the other option. Since a majority of South Koreans own smart phones, Tesco decided to come up with something unique. They decided to take the store to the customers instead and came up with a completely unique online shopping experience by introducing the 'Virtual Store', on the subway platform in Seoul (August 2011).
The virtual store is nothing but getting the subway station walls with virtual life-size images of groceries, as available on shelves of the supermarket. The virtual items on display have QR codes, which have to be scanned using the smart phone (Homeplus App). The selected products are then delivered to one's home at the time requested. Commuters going home from work can purchase the necessary groceries from the platform itself, thereby optimizing their time.
Tesco viewed 130% increase in sales, in a span of just 3 months. Moreover, the customer base rose by 76%. As per their aim, they have become the number 1 online grocery store, with only a small margin of difference between them and E-Mart. So they did bring more stores to the people, without building them.
Tesco started off with cohort analysis, wherein they studied their customers and found majority of them to be the South Korean working class, who had the money but less time to shop for groceries. Busy lifestyle was the common factor uniting their customers. Then, their target market became the busy South Korean working class. However, something to note is that technographic segmentation was taken into consideration. This strategy worked in South Korea, because a fifth of the total population own smart phones. Had Tesco tried this out in a country, where majority of the people don't own smart phones, it would fail.
It's a simple fact of life that no matter how hard we try, we cannot please everybody. There is no product in the market that has managed or will ever manage to satisfy every customer. Thus, the wisest thing to do would be to focus on a particular segment or target market, investing all efforts and money into this potential customer pool. Once you hit the most suitable target market strategy, the sales of the product will begin to climb rapidly.