The company’s efforts aimed at finding and identifying a narrow circle of consumers have a clear economic definition – targeted marketing. The further promotion of the product and, accordingly, the final financial result depends on the correct approach to the market, choosing a strategy and drawing up an action plan. Basic knowledge of effective marketing techniques will help create a positive product image and achieve success in the shortest possible time.
What it is
A number of activities aimed at identifying individual groups from the total number of consumers who are guaranteed to be interested in a particular product is called target marketing…
The list includes analytical assessment, market segmentation and planning. Taken together, all actions pursue a single goal – the effective promotion of a commercial product.
The choice of the target market (targeting) is carried out according to the STP principle:
- determination of the target audience (Targeting)
An excellent understanding of your potential buyers becomes the basis for creating marketing strategies and tactics – pricing, product design, advertising campaign features. In addition, targeting provides more accurate data on the commercial behavior of consumers, which helps to analyze, predict and improve market strategies.
Markets in marketing generally fall into two main types:
- consumer – consists of individuals or households who buy goods for personal consumption and do not intend to resell these goods for profit.
- business – consists of people or organizations that buy goods for specific purposes: resale, use in the production of other goods or services, use in daily business operations.
Segmentation approaches will differ depending on whether the common available market is consumer or business.
While there are many different ways to segment the market, the most commonly used are:
- geographic – location, climate, region;
- demographic – age, gender, material, marital status, education, religious beliefs, etc .;
- psychological – relationships between the sexes, values, beliefs, interests and lifestyle;
- behavioral – the regularity of product use, the degree of loyalty, user status, readiness to purchase.
During the segmentation process, detailed profiles are developed for each market area, which describe the similarities and differences between consumers of different groups. To summarize, all the information in the profiles relates to the product – consumer habits, shopping propensities, preferred brands, loyalty to similar products or services.
The process has several advantages:
- Identify the segments that are most attractive to the business;
- Provides quantitative data about consumers, for a more objective assessment of the attractiveness of the segment;
- Helps to tailor a product or service to the needs of customers;
- Affects the efficient allocation of company resources.
After profiling, a detailed market analysis is carried out to identify one or more segments that deserve further study.
Targeted marketing consists of three main segmentation strategies:
Undifferentiated or Mass Targeted Marketing
The method is used to reach as many people as possible for an advertising campaign. An example is a commercial for a single product that has been broadcast on television for several weeks / months.
Differentiated target marketing
A practice in which different messages are advertised to attract specific groups of people to a target market. The method requires tangible material investments, since every time it involves new ideas, developments, product presentations, etc.
Concentrated Targeted Marketing (Niche)
The company’s efforts are aimed at a specific aspect or group of consumers. This means that all resources and skills are used in one specific niche. It is one of the most successful marketing strategies because it identifies the key category to focus on. This allows companies to have a competitive advantage over other large firms targeting the same consumer group. As a result, higher profits are generated.
For example, promoting a lingerie store for women from 18 to 45 years old or goods for reptiles.
Targeted marketing techniques
To achieve success in targeted marketing, economists have developed a five-step program:
- Draw up a marketing plan – an assessment of the current state of the company, which niches are planned to be mastered, the percentage of potential competition. Includes important elements such as target market, consumer interests and available resources.
- Focus the program on the target audience. To offer a unique product that meets the expectations of buyers.
- Study of competition in a market segment. Focus on the most underdeveloped niche or create a great advertising campaign that has no analogues in order to create a positive image of the product.
- Promotion based on niche expertise. The main focus is on experienced employees who can not only offer an original idea for an advertising campaign, but push the boundaries of a niche. Thus, a completely new segment is created in which the product is successfully sold.
- Merging small market segments. The company may have found its potential niche, but cannot sell its product / service due to the lack of tools and resources for promotion. Then a merger with another organization is applied, which has the necessary experience, information for conducting targeted marketing.
In general, targeted marketing is an excellent strategy for small and medium-sized businesses, as it does not require high costs and can be applied immediately after defining a market segment (niche).
Target market selection
The key to choosing target markets is to answer the question: Are customer needs different enough to support segmentation and targeting?
In the event that the demand for a particular product is relatively similar, the company may decide to use an undifferentiated approach.
On the other hand, when customer needs differ across segments, then differentiated targeted marketing is needed. Segmentation analysis may reveal that none of the segments provide real opportunities, and the firm decides not to enter the market.
From the point of view of assessing markets, only three indicators of segment attractiveness are objectively significant:
- Distance Criterion: A business tries to define its main geographic coverage area by identifying people who live within a predetermined distance. For a retailer or service provider, the distance can be about 5 km. For domestic tourist destinations – 300 km. This method is widely used in retail.
- Sales Criterion: Using this method, a business allocates its resources to target markets based on historical sales patterns. Especially useful in conjunction with trade metrics. The disadvantage is that additional market potential is not taken into account.
- Methods for identifying interests: Initial research, usually in the form of surveys, identifies people who have not purchased a product or service, but are positive and show some interest in making a purchase in the short term.
Chain factor and indexing methods are also popular for target market selection.
But they require in-depth economic knowledge and the involvement of specialists, which in turn affects the cost of product promotion.
Developing a plan
After the segmentation has been completed, target markets have been selected and a positioning strategy has been developed, you can begin to form a marketing complex taking into account the needs, desires and motivation of the target audience. The main elements of the process are:
- product – the offered product or service, taking into account its characteristics and advantages for consumers, as well as how it is positioned on the market (high or low quality);
- price – includes both monetary and psychological costs, such as a combination of cost, payment methods and other associated acquisition efforts;
- place – how the product physically reaches the consumer, in particular, where the service or product is sold, distribution channels, etc .;
- promotion – the transfer of information to consumers, includes advertising, public relations, customer relations, sales promotion and any other activities to communicate with target markets.
In the classic work of E. Jerome McCarthy “Basic Marketing: A Management Approach” four elements of targeted marketing are described in detail, which are considered the basis for effective promotion of goods and services. The book should become a practical guide to any entrepreneur who wants to take their business to the next level.
Targeted marketing involves a comprehensive study of all risks before starting production activities. For example, state norms and standards (GOSTs) for a product planned for release are analyzed in detail.
The costs of licenses and certificates are necessarily included not only in the cost of goods, but also in the estimate of the advertising campaign.
Also, a forecast is made on the actions of competing companies – what possible measures they can take to maintain their product in the selected market segment. This can be a decrease in value, holding promotions, increasing the range, etc. Alternatively, the niche is free and, at first glance, does not need to be analyzed. But this will be so only until the first significant profit is received. Successful experience is quickly adopted. There are thousands of examples, from the nail business to boutiques serving a select group of people.
That is why, to study the risks and prevent their negative impact, it is possible only through a thorough analysis of all aspects of the chosen type of activity.
Advantages and disadvantages
Targeted marketing is a necessary measure to increase the chances of a business to thrive in the long term.
But, like any economic strategy, there are advantages and disadvantages that must be considered before developing an action plan.
- gaining valuable experience in product promotion;
- protection from competition (conditional);
- clear knowledge of consumer needs;
- relatively small expenses for an advertising campaign.
- targeted marketing is generally vulnerable due to many factors that affect the preparation of the right plan;
- a separate market segment is difficult to master;
- communication with clients must be constant;
- the inability to accurately predict the actions of competitors.
Targeted marketing is a useful tool with which you can paint a detailed picture of “your” audience. A complete understanding of the demographics, interests, problems, needs of future customers is the key to creating an effective strategy in which buyers will willingly enter into commercial relations. Biographies of successful businessmen who have experienced ups and downs clearly indicate that you should not rely on intuition alone. Only a systematic approach, which is targeted marketing, can ensure the development of a company.
If you already have personal experience with market segmentation, share your successes in the comments! Perhaps this will be a great motivation for hesitant entrepreneurs.