The target market defines the entire business of the company. Its characteristics are the basis for creating appropriate development strategies and conducting effective marketing activities. How to choose it?
What is the target market?
Whether a company will operate efficiently and ultimately succeed in the market depends on many factors. The adventure with a real, professional business begins at the stage of defining the first assumptions of the company. The entrepreneur first of all has to decide to whom he wants to direct his offer. Choosing your target market is therefore a key aspect in building a business.
In the Encyclopedia of Management, we can read that a target market is "one or several segments served by a given company that shapes marketing instruments in such a way as to win a new customer or keep existing buyers". In other words, it is a specific group of buyers with specific needs that the company has acquired or wants to acquire through marketing activities aimed at meeting these needs.
You don't know who are the recipients of your products / services?
To be effective, you need to know who you are addressing your offer to!
Defining the target market - the basis of success
Proper definition of the target market facilitates company management in every area. Above all, it is the basis for creating and running an effective one development strategy. It enables the selection of appropriate sales channels for products or services, determines the best form of communication and promotion. In addition, it allows cost optimization doing business.
Knowledge of social, demographic, economic and other factors creates a clear, concrete picture of the potential demand for the products or services offered. The company knows what is selling, knows the needs of its customers, and thus does not expose itself to sales failures and unnecessary financial losses.
Knowing your target market perfectly, you can create products or services that meet the needs of consumers and conduct marketing activities based on these needs, and thus effectively increase sales and generate attractive profits.
One or several segments?
The enterprise may target its offer to one or more market segments. The choice depends on the purpose of the company and how it will direct its business. Too few segments or the selection of a too narrow segment may result in low profits, not allowing for maintaining financial liquidity. On the other hand, an overly broad object of activity may lead to the loss of benefits that could result from specialization in a particular segment. The key to success is therefore a detailed analysis of individual segments, which will allow you to assess their attractiveness and potential.
Target market - segments
The process of determining the target market is based on the analysis of market segments. The segments are assessed on the basis of several criteria. Among the most important, we will mention:
- segment size and capacity,
- development trends,
- the number of competitors,
- price sensitivity,
- market barriers - inputs and outputs,
- consumer trends,
- compliance of the segment with the goals and resources of the enterprise.
Choosing a market step by step
How to define the target market? The first step in this process is customer analysis. A newly established enterprise should prepare a model of an ideal customer. The model must take into account: the needs of recipients, the values they follow, demographic data, language they use, purchasing power, lifestyle and purchasing preferences. Entrepreneurs who have been in business for some time should start to gather information about their current and former clients. The next step is to identify the common features of these customers and create a persona, i.e. a model customer.
If your company is targeting business customers rather than individual customers, pay attention to:
- company size - whether they are small, medium or large enterprises,
- location - where they have their headquarters,
- market - in which industries and areas they operate,
- finances - how do they obtain money, how much are they willing to spend on the company's products / services.
Customer analysis identifies common features of customers and market trends. This, in turn, is the basis for the selection of appropriate tools and communication channels in order to conduct effective marketing activities.
In the process of defining the target market, the product offered by the company is of key importance. Proper market segmentation requires the company to understand the customer's purchasing motivation, i.e. to identify what makes them interested in buying. The company, through market research and direct interviews with customers, should identify the features of its product that distinguish it from the competition. Understanding the advantages of the offered merchandise sides is the basis for creating an effective one business strategy.
A helpful tool in selecting the target market is the SWOT analysis, which allows you to identify the strengths and weaknesses (not only of the product, but the entire enterprise), as well as threats and opportunities that result from the market environment. The analysis should take into account the actions of the competition.
The last step in defining the target market is to separate the segments and choose the right ones.
Target market models
The company may operate according to one of several target market models. Small enterprises usually focus their activities on one market segment only. Choosing one segment enables effective business management even with limited resources - it gives a chance to develop a strong and effective position creating an image in your area. The segment must be distinguished by high profitability, and the company should have extensive marketing skills. Then the actions will be effective.
Another model is product specialization, which consists in the production of a specific product in many versions, in order to meet the needs prevailing in various segments. The risk associated with such a solution is the development of new technologies, which enables the creation of improved competitive products.
The target market can be divided into:
- selection of several market segments - operation in several segments according to individually tailored marketing strategies,
- market specialization - offering most of the goods sought only in one market segment,
- presence in all market segments - servicing all segments with the use of one universal marketing plan or several individually tailored.
It is worth defining the target market at the beginning of your business activity. His perfect knowledge and the ability to use this knowledge in practice is the key to running a business with a guarantee of success!