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20.10.2008 Feature Article

Target Marketing: A precondition for doing business

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A company identifies or singles out groups of customers for its products and directs some or all of its marketing activities at them.

It develops and maintains a marketing mix, consisting of a product, a distribution system, promotion and price that effectively meet customers' needs.

People have given different kinds of definitions to the word 'market'. There are those who refer to it as a specific location where products are bought and sold. A large geographic area may also be termed a market. 'Market' is seldom referred to as the relationship between demand and supply of a specific product.

One can, for example, ask one's friend, "How is the market for maize in Techiman?" "Oh, it is doing quite ok," or as the case may be. There are other cases where 'market' is used to mean the act of selling.

According to Kumar and Meenakshi, a target market is a group of people or organizations for which a company designs, implements, and maintains a marketing mix intended to meet the needs of the group, resulting in mutual beneficial and satisfying exchanges.

From this definition, it might be understood that there is no company in this competitive world that can be proud of serving all customers in a broad market such as newspapers or computers.

The compelling reason is that customers are too numerous and diverse in their buying requirements. As a result of this, every customer-oriented company consciously has to identify its market segments, which it can effectively serve. To them, segmentation involves identification of groups of individuals or organizations that have significant implications for determination of a marketing strategy. It is about dividing a diverse market into a smaller, more similar submarkets.

You know the objective? It is aimed at identifying groups of customers with similar requirements, so that they can be served effectively while being of a sufficient size for the product to be supplied efficiently. It is the basis by which marketers understand their markets and develop strategies for serving their chosen customers better than competition.

A very important thing that marketers and marketing students need to understand is that segmentation provides the basis for selection of target markets. And so we will say that a target market is a chosen segment of the market which a marketer or company has decided to serve.

These customers in the target market have similar characteristics and so a single marketing mix will thus be used to serve them. Therefore, creative segmentation may result in the identification of new segments that are not being served presently and may form attractive targets.

In this sophisticated marketing environment, many companies are embracing target marketing. Sellers distinguish the major market segments, target one or more of these segments, and develop products and marketing programmes tailored to each. According to Kotler, instead of scattering market effort (a 'shotgun' approach), they focus on the buyers that have the greatest chance of satisfying (a 'rifle' approach).

Types of Markets

Markets fall into one of two categories – consumer markets and organizational or industrial markets. These categories are, however, based on the characteristics of the individuals and groups that make up a specific market and the purpose for which they buy products.

Pride and Ferrell explain that a consumer market consists of purchasers and/or individuals in their households who intend to consume or benefit from the purchased products and who do not buy the products for the main purpose of making profit. You can trust that each of us belongs to numerous consumer markets.

An organizational or industrial market, on the other hand, consists of individuals or groups of people who purchase a specific kind of product for one of the following purposes:


direct use in producing other products, or

use in general daily operations.

For example, a publishing company that buys paper reels and ink to use in the production of newspapers or books is a part of the industrial market for paper reels and ink.

This same firm purchases disinfectants to clean its office areas. Although the disinfectants are not used in the direct production of newspapers or books, they are used in the operations of the firm; thus, this publishing house is part of the industrial market for disinfectants.

Kotler delineates that marketers are required to take three major steps in target marketing:

Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation).

Select one or more market segments to enter (market targeting).

For each target segment, establish and communicate the key distinctive benefit(s) of the company's market offerings (market positioning).

Market Segmentation Strategies

There are two major segmentation strategies - the concentration strategy and the multi-segment strategy.

When an organisation directs its marketing efforts toward a single market segment through one marketing mix, it is following a concentration strategy. Companies have discovered that concentrating resources and meeting the needs of a narrowly defined market segment is more profitable than spreading resources over several different segments. Starbucks became successful by focusing exclusively on customers who wanted gourment coffee products. This allows an organisation to specialize in whatever it produces. Also, by concentrating all marketing efforts on a single segment, the organisation has an opportunity to analyse the characteristics and needs of a distinct customer group.

This organisation can then direct all efforts towards satisfying that group's needs. An organisation can generate a large sales volume by reaching a single segment. However, specialization can also be deleterious - it is like putting "all eggs in one basket".

On the other hand, a company which starts with concentrated targeting strategy, but later nurses ambitions to serve more segments, should make early and periodic forays into segments. The idea is to avoid being labeled as the company which exclusively serves a particular segment. The association with one particular segment should not be allowed to become so strong that customers cannot imagine the company doing something else.

After an organisation has used a concentration strategy successfully in one market segment, it sometimes focuses on several segments. That is what is known as a multi-segment strategy. This is a situation in which an organisation directs its marketing efforts at two or more segments by developing a marketing mix for each selected segment.

For example, a smart manufacturer of spectacles may produce dark spectacles for the fashionable young ladies, and produce plain ones for young guys. Here, the marketing mixes used for a multi-segment strategy may vary in terms of product differences, distribution methods, promotion methods, and prices.

There is, therefore, no denying the fact that a business using the multi-segment strategy can usually increase its sales in a total market by focusing on more than one segment, because the firm's mixes are being aimed at more people.

This strategy, when effectively applied, creates the potential to generate sales volume, higher profits, larger market share, and economies of scale in manufacturing and marketing. The strategy, however, involves greater product design, production, promotion, inventory, marketing research, and management costs.

Another cost is cannibalisation, which occurs when sales of a new product cut into sales of a firm's existing products. Before deciding to use this strategy, as suggested by Kumar and Meenakshi, a company should compare the benefits and costs of multi-segment targeting to those of undifferentiated and concentrated targeting.

Conditions for Effective Segmentation

Whether an organisation uses the concentration approach or the multi-segment approach, several conditions must exist for market segmentation to be effective.

According to Pride and Ferrell, a company must first find out whether consumers' needs for the product are heterogeneous. If they are not, there is little need to segment the market. Second, the segment must be identifiable and divisible.

The company must find some basis for effectively separating individuals in a total market into groups, each of which has a relatively uniform need for the product. Third, the total market should be divided in such a way that the segments can be compared with respect to estimated sales potential, costs, and profits.

Fourth, at least, one segment must have enough profit potential to justify developing and maintaining a special marketing mix. Finally, the organisation must be able to reach a chosen segment with a particular marketing mix.

Credit: Bala Sa-ad

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Daily Graphic, © 2008

The author has 236 publications published on Modern Ghana. Column Page: DailyGraphic

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