In target marketing, the seller distinguishes the major market segments, targets on or more of these segments and develop products and marketing programs tailored to each selected segment. Target marketing help sellers indentify marketing opportunities better. The sellers can develop the right offer for each target market. They can adjust their prices, distribution channels and advertising to reach the target market effectively.
Target marketing calls for three major steps. The first is market segmentation, the act of dividing the market into distinct of buyers who might require separate products and/or marketing mixes. The second step is market targeting, the act of developing measures of segment attractiveness and selecting one or more market segment to enter. The third step is product positioning, the act of establishing a variable competitive positioning of the firm and its offer in each target market.
Market targeting involves two steps:-
a) Segment Evaluation b) Selection
In evaluating different market segments, the firm must look at three factors namely segment size and growth, segment structural attractiveness and company objective and resources.
i) Segment size and growth :- The first criteria of segment evaluation is whether a potential segment and right growth and size characteristics. The right size is a relative term. Large companies prefer segments with large sales volumes and often overlook or avoid small segments. Small companies in turn avoid large segments because they require too many resources.
Segment growth is a describe characteristics, since companies generally want growing sales and profit.
ii) Segment Structural Attractiveness:- A segment might have desirable size and growth and still not be attractive from a profitability point of view. The company has to appraise the impact on long run profitability of five groups: a) industry competitors b) Potential entrants c) substitute d) buyer e) supplier.
a) Threat of Intense segment Rivalry: A segment is unattractive if it already contains numerous strong or aggressive competitors.
b) Threat of view entrants: A segment is unattractive if it is likely to attract new competitors who will bring in new capacity, substantial resources and a drive for market share growth.
c) Threat of substitute Products: A segment is unattractive if there exist actual or potential substitutes for a product. Substitute place a limit on the potential prices and profits that can be earned in a segment.
d) Threat of growing bargaining power of buyers: A segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers will try to force prices down, demand more quality or services and set competitors against each other, all at the expense of seller profitability.
e) Threat of Growing Bargaining Power of Suppliers: A segment is unattractive if the company’s suppliers raw material and equipment suppliers, bank, trade unions and the like-are able to raise prices or reduce the quality or quality of ordered goods and services.
III) Company Objectives and Resources: The company needs consider its own objectives and resources in relation to a segment under consideration. Some attractive segments could be dismissed because they do not mesh with company’s long-run objectives. They may be tempting segments in themselves, but they do not move the company forward towards its goods. Even if the segment fits the company’s objectives, the company must consider whether it possesses the requisite skills and resources to succeed in that segment. But even if the company possesses the requisite competences, it needs to develop some superior advantages to the competition. It should not enter markets or market segments where it cannot produce some form of superior value.
II. Selecting the Market Segment: a target market consists of a set of buyers sharing common needs or characteristics that the company decides to serve. The company can consider five patterns: a) Single-segment concentration b) Selective specialization c) Market Specialization d) Product Specialization and e) Full Coverage.
a) Single- Segment Concentration:- In the simplest care, the company selects a single segment. Through concentrated marketing, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s needs and the special reputation it builds. At the same time, concentrated marketing involves higher than normal risks. The particular market segment can turn sour. Or the competitors may decide to enter the same segment. Foe these reasons, many companies prefer operate in more than one segment.
b) Selective specialization:- Here the firm selects a number of segments, each of which is objectively attractive and matches the firm’s objectives and resources. Each segment promises to be a money maker. This strategy of multi segment coverage has an advantage over single segment coverage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can continue to earn money in other segments.
c) Product Specialization:- Here the firm concentrates on making a certain product that it sells to several segments. Through this strategy, the firm builds up a strong reputation in the specific product area.
d) Market Specialization:- Here the firm concentrates on serving many needs of a particular customer group. The firm gains a strong reputation of specializing in serving this customer group and becomes a channel agent for all new products that this customer group could feasibly use.
e) Full Market Coverage:- Here the firm attempts to serve all customer groups with all the products that they might need. Only large firms can undertake a full market coverage strategy. Examples would include coca cola (non-alcoholic be verage) ; IBM (Computer market) etc.
Large Firms can cover a whole market in two broad ways:- namely through undifferentiated marketing or differentiated marketing.
Undifferentiated Marketing:- The firm might ignore market segment differences and go after whole market with one market offer. It desigues a product and a marketing programme that will appeal to the broadest number of buyers. It relies on mass distribution and mass advertising.
Undifferentiated Marketing is depended on the grounds of cost economics. The narrow product line keeps down production, inventory and transportation cost.
Differentiated Marketing:- Here the firm operates is most market segments but designs different programmes for each segment. General motor claims to do this when it says that if produces car for every purse, purpose and personality. However, it also increases the cost of doing business.