What is Target Market?

Legal Definition
A target market is a group of customers a business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element of a marketing strategy. Product, price, promotion, and place are the four elements of a marketing mix strategy that determine the success of a product or service in the marketplace. It is proven that businesses must have a clear definition of their target market as this can help reach its target consumers and analyze what their needs and suitability are.

A target market is a group of people considered likely to buy a product or service. A target market consists of customers that share similar characteristics, such as age, location, income and lifestyle, to which a business directs its marketing efforts and sells its products. As marketing efforts are becoming increasingly online based, the need to find the right market for marketing campaigns is essential. One of the first steps in developing an effective marketing campaign is determining an appropriate target market so that marketing goals can be set and implemented.

Target markets can be separated into primary and secondary target markets. Primary target markets are those market segments to which marketing efforts are primarily directed and secondary markets are smaller or less important. For instance, the primary target market for a jewellery store might be middle aged women who care about fashion, and their secondary target market could be middle aged men who may want to buy gifts for the women in their lives.

It is important for a business to identify and select a target market so it can direct its marketing efforts to that group of customers and better satisfy their needs and wants. This enables the business to use its marketing resources more efficiently, resulting in more cost and time efficient marketing efforts. It allows for better understanding of customers and therefore enables the creation of promotional materials that are more relevant to customer needs. Also, targeting makes it possible to collect more precise data about customer needs and behaviors and then analyze that information over time in order to refine market strategies effectively.

Target markets or also known as target consumers are certain clusters of consumers with similar or the same needs that most businesses target their marketing efforts in order to sell their products and services. Market segmentation including the following:

  • Geographic - Addresses, Location, Climate, Region
  • Demographic/socioeconomic segmentation - Gender, age, wage, career, education.
  • Psychographic - Attitudes, values, religion, and lifestyles
  • Behavioral segmentation - (occasions, degree of loyalty)
  • Product-related segmentation - (relationship to a product)

Market segmentation divides the market into four main sub categories – demographic, geographic, psychographic and behavioural segmentation. After doing market segmentation the subdivision market will be much more specific and it is relatively easy to understand consumer demand, enterprises can determine their own service objects according to their business ideology, principles and production technology and marketing power. To aim at the small target market, which is easy to formulate the special marketing strategy. At the same time, in the segments of the market, the information is easy to understand and feedback, once the consumer demand changes, enterprises can rapidly change marketing strategy formulated corresponding countermeasures, in order to adapt to the change of market demand, improve the flexibility and competitiveness of enterprises. Through market segmentation, the enterprise will be able to notice every subdivision market purchasing potential, satisfying degree, competition and comparative analysis, to better meet market needs. Meanwhile, the manpower, material resources and funds of any enterprise are limited. Through market segments, after select the suitable target market, enterprises can focus more on human, financial, and material resources, to fight for the advantages of local market, and then to occupy their own target market. Segmenting the market allows marketers to better understand the group they are aiming their message at, which is more efficient than aiming at a broad group of people. Segmentation has been an essential part of marketing since industrial development induced mass production, particularly in manufacturing. This caused the focus to shift from customer satisfaction to reduction of production costs. However, as manufacturing processes became more variable, and consumer demand diversified, businesses needed to respond by segmenting the market. Businesses who were able to identify specific consumer needs were able to develop the right message for consumers within particular segments, which gave them a competitive advantage (Wedel & Kamakura, 2012). Since being introduced by Wendell R. Smith in 1956, the theory has become a key concept in marketing. Smith stated: "market segmentation involves viewing a heterogeneous market as a number of smaller homogeneous markets, in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants." (Wedel & Kamakura, 2012). Not establishing a target market will often result in a poor response from consumers, or no response at all. The aim of market segmentation for businesses is to gain a competitive advantage by having a better understanding of a specific segment than its competitors. Hunt and Arnett (2004) use the example of Black and Decker power tools, and the way the company segmented the market into three main groups. After identifying each different group, Black and Decker then designed one separate power tool range for each segment, based on their characteristics. "To target each segment, B&D uses specific products lines with different brand names" (Hunt & Arnett, 2004).

Demographic segmentation refers to aspects of a market such as age, gender, race, occupation and education. Creating a message aimed at a particular demographic allows the sender to reach a wide range of receivers, while still staying within the confines of a specific segment. "Demographic segmentation almost always plays some role in a segmentation strategy" (Thomas, 1980), and is often paired with other segments to create a slightly more specific segment. A luxury good or service may be marketed to high income earners if the marketer believes that it would be relevant across a large enough portion of the segment to make it profitable for the sender, or create the awareness intended. Certain brands only target working professionals whereas others might only target people who are at high school.

Geographic segmentation divides the market by location. This could be divided into countries, cities, towns and neighborhoods etc. Different geographic locations usually have different aspects to their environment, which allows marketers to appeal to the specific needs of each location. For example, marketers could target tractors specifically towards rural areas where there are likely to be a number of farmers who operate tractors. In contrast, it would not make sense to market those same tractors in an urban area where people are not likely to find them as useful (Thomas, 1980).

Psychographic segmentation relates to dividing a market based on how they live their everyday lives. This could encompass their values, as well as their personality, attitudes and general interests (A. S. Boote, 1984). According to Boote (1984), a popular psychographic segment in marketing is personal values. In the example used, a segment categorised by how much money a consumer is willing to spend on a product could be defined by certain inclinations when shopping. One being – "spending no more money than is necessary…even if it means not buying the best." Another orientation being – "shopping around to get the best price once I have decided on the kind of product I want to buy." By learning about these orientations, the marketer is able to gauge different attitudes of the consumers potentially being targeted.

Behavioural segmentation subdivides the market depending on how consumers behave towards a product. Consumers behave differently depending on occasions and the frequency of usage of a product. For example, a spouse may not usually spend money on flowers for their significant other, but might on Valentine's Day, as it is a special occasion. "Many Marketers believe that behaviour variables are the best starting points for building market segments" (Tatum, 2007).

Market segmentation involves subdividing the total market into groups of people who share common characteristics, to which the business can direct specific marketing efforts. Segmenting markets aims to increase sales, market share and profits by better responding to the desires of the different target customer groups. A segmentation variable is a characteristic of individuals or groups used by marketers to divide a total market into segments. Markets can generally be segmented according to four main variables: demographic, geographic, psychographic and behavioural characteristics.

One key to identifying the best target market is assessing brand loyalty involving attitudes and behaviors toward the brand. Buyer groups can be divided into the following: those loyal to the brand, those who buy your brand but also buy from competing brands, those who buy more than one competing brand, those who are regularly loyal to another brand, and new users who are entering for the first time or re-entering. Loyalty, which concerns consumer attitudes in terms of interest in competitive alternatives, overall satisfaction, involvement, and intensity, has become increasingly important in competitive markets.
-- Wikipedia
Legal Definition
The particular segment of the market that is the focus for a marketing campaign.