Market Targeting

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Market Targeting

Once a firm has identified its market-segment opportunities (Market Segmentation), it can proceed with Market Targeting.
In the market targeting process, companies first perform a market segments evaluation typically based on 2 main factors:

• The segments' overall attractiveness.
• The segments' specific attractiveness for this company. This depends on the company's objectives, resources and capabilities. Some attractive segments could be dismissed because they do not fit to the company's long-term objectives; other segments might be dismissed if the company lacks a competency needed to offer superior value, still others could be dismissed simply because there are better alternatives available and/or the financial resources of the company are limited.

Following the evaluation of the various available segments, the company can then proceed with target market selection, while considering 5 patterns of target market selection:

• SINGLE SEGMENT CONCENTRATION: The company concentrates on a single segment: For example, Ferrari concentrates on the sports car market. In concentrated marketing (also called niche marketing) the firm should have a thorough understanding of the segment's needs in order to achieve a strong market presence. If the firm attains segment leadership, it can earn a very high profit margin.
• SELECTIVE SPECIALIZATION: The firm selects a number of segments, each objectively attractive and appropriate. There may be little or no synergy among the segments, but each segment promises to be a moneymaker. This multisegment coverage strategy has the advantage of distributing the firm's risk. An example could be a TV channel that wants to appeal to both young and older viewers by using selective specialization.
• PRODUCT SPECIALIZATION: The firms specializes in making a certain product for several segments. An example would be a medical device manufacturer that sells a particular device to hospitals, laboratories, and the military. Through a product specialization strategy, the firm builds a strong reputation in the specific product area. The obvious risk of this strategy is that the product may one day become obsolete.
• MARKET SPECIALIZATION: the firm concentrates on serving several or many needs of some particular customer group. An example would be a firm that sells an assortment of products only to emergency hospitals. The firm gains a strong reputation in serving this customer group and might introduce more and more products that the customer group needs.
• FULL MARKET COVERAGE: Here a firm attempts to serve all customer groups with all of the products they might need. Only very large firms can undertake a full market coverage strategy. Examples include IBM (IT market), Mercedes-Benz (vehicle market), and Coca-Cola (drink market). Large firms can cover a whole market in two broad ways: through undifferentiated marketing (the firm ignores market-segment differences and goes after the whole market with one market offer) or differentiated marketing (the firm operates in several market segments and designs different programs for each segment).

Besides the obvious criterion of profitability, it is increasingly important for companies to select target markets in a socially responsible manner, by ensuring that the targeting serves the interests of the market being targeted as well as the company.

Sources:
Philip Kotler, (2001), "Marketing Management Millenium Edition", 2001, 10th Edition, pp. 155-158