Targeting Market Segments

To select target segments, the firm must consider a combination of factors, including the segment’s potential sales volume and profits, competition currently selling to the segments, and the firm’s abilities and objectives.

Although large segments with a substantial number of buyers seem to promise high potential sales volume and profits, smaller segments served by a unique marketing mix may also provide lucrative business opportunities. Specialty stores in large malls serve many of these segments. For example, General Nutrition Center targets health-conscious people, and Lady Foot Locker, women sports enthusiasts.

The large markets may also attract the greater number of competing firms (the majority fallacy). In general, a firm will have to assess market potential in light of competitive issues. If the firm has a competitive advantage that cannot be easily copied, it may attempt to approach the larger market segments.

The selection of target markets has a lot to do with the firm’s objectives and distinctive competence. A firm specializing in innovative technological products, for example, may compete on total value, rather than on price alone, focusing on one segment or a few segments where high-quality, innovative products appeal.

Targeting also requires designing advertising and promotional mixes to reach the intended segments. Resources are wasted if the advertising results in duplication of audience or reaches nontarget market consumers. Accurate identification of the marketing segments appropriate for a particular product is critical if firms are to target those segments efficiently.

Technology brings new precision to both the selection of specific target segments and the ability to reach them. The benefits of targeting are prevalent in the marketplace – the grocery, clothing, and shoe industries included. For example, the use of in-store scanners and grocery card loyalty programs are enabling grocery retailers to more precisely target their consumers. These customers are targeted with special promotions and advertisements designed to increase their transaction numbers per store visit. Moreover, data on the preferences of these desirable consumers are useful in determining shelf-space allocations among competing brands. Targeting specifically toward baby boomers has also enabled a new Balance to compete successfully with Nike in the very competitive athletic-shoe market.

Comprehension questions:

1. What must a firm do to select target markets?

2. What does targeting require?

3. What is the role of technology in targeting?

4. What are the benefits of targeting?