Understanding targeting strategies enables businesses to connect more effectively with the right customers. This is a critical step in implementing a successful marketing strategy.
What is a Target Market?
A target market is a specific group of consumers that a business decides to aim its products and marketing efforts at. This group is usually identified after conducting market segmentation, where the market is divided into smaller, more manageable groups based on shared characteristics.
The target market is the segment or segments the business believes will provide the best opportunity for growth, profitability, and customer loyalty. These consumers are more likely to respond positively to a business’s product offerings, marketing messages, and brand values, making targeting a strategic priority.
The Process of Selecting Target Markets
Once market segments have been identified, the business goes through a structured process to determine which of those segments it should serve. This process generally includes the following stages:
Evaluate Market Segments
The business analyses the potential of each segment by looking at factors such as:
Size – How many potential customers are there?
Growth – Is the segment expanding or declining?
Profitability – Will the segment provide a good return on investment?
Accessibility – Can the business reach this segment easily with its current distribution and marketing channels?
Assess Company Strengths and Resources
A business must consider its own capabilities when choosing a segment:
Does it have enough financial, human, and technical resources to serve the segment effectively?
Does it have experience or a competitive edge in this area?
Analyse External Factors
Environmental and competitive factors play a big role:
What is the level of competition in the segment?
Are there legal or cultural barriers to entry?
Are there emerging trends that may influence the segment?
Select Target Market(s)
After all assessments, the business selects one or more segments to pursue. This is known as targeting, and the choice should align with the company's overall strategic goals and brand identity.
Tailor the Marketing Mix
The business adapts its product, price, place, and promotion to suit the selected segment. This customisation is essential for resonating with the target audience and achieving competitive success.
Mass Marketing vs Niche Marketing
There are two primary types of targeting strategies: mass marketing and niche marketing. These strategies lie on opposite ends of the marketing spectrum and are used depending on the business’s goals, resources, and the nature of the product.
Mass Marketing
Definition:
Mass marketing is a strategy where a business targets the entire market with a single marketing offer, regardless of the differences between consumers.
Key Characteristics:
Standardised products with universal appeal.
Uniform pricing and promotional strategies.
Distribution through as many outlets as possible to achieve maximum reach.
Focus on high-volume sales and economies of scale.
Advantages:
Lower production and marketing costs due to standardisation.
Stronger brand recognition due to wide exposure.
Simplified operations, with a single product line and uniform messaging.
Disadvantages:
Less responsive to individual needs, which can reduce customer satisfaction.
Greater exposure to competitors who offer more tailored solutions.
Harder to build brand loyalty, as the product may be seen as generic.
Real-World Example:
Coca-Cola uses a mass marketing strategy for its classic soft drink. The product is largely the same around the world, with global campaigns focusing on universal themes like happiness and sharing.
Niche Marketing
Definition:
Niche marketing involves targeting a specific, well-defined segment of the market. This group has unique characteristics or needs that aren’t being met by mainstream providers.
Key Characteristics:
Products and services are tailored to meet specific needs.
Marketing messages are personalised and relevant.
Often used by smaller businesses or startups that want to focus on areas with less competition.
Advantages:
Higher customer loyalty due to greater relevance and connection.
Less competition in specialised areas.
Ability to charge premium prices, as products are perceived as high-value or exclusive.
Disadvantages:
Smaller customer base, which may limit growth.
Vulnerability to market changes, such as shifting trends or economic downturns.
Dependence on a single market segment, which can be risky.
Real-World Example:
Gymshark, a UK fitness apparel company, targets a specific demographic—young fitness enthusiasts and influencers. Their products are designed for this audience, and their marketing is driven through platforms like Instagram and TikTok, where this niche is highly active.
Factors Influencing Targeting Decisions
When deciding which segments to target, businesses must take a wide range of factors into account. These factors can be both internal (related to the company itself) and external (related to the market environment).
1. Segment Size and Growth Potential
Importance:
A segment must be large enough to generate revenue, but not so large that it becomes impossible to serve effectively. Businesses also need to consider whether the segment is growing, stable, or declining.
Considerations:
Large, stable segments are often targeted by established companies.
Smaller, high-growth segments can be attractive to new entrants or innovative businesses.
Example:
A health food company might choose to target the vegan market because, although it is relatively small, it is growing quickly and shows strong future potential.
2. Company Resources
Importance:
A business must have the necessary resources to serve the chosen segment. These resources include:
Financial capital to invest in marketing, distribution, and product development.
Staffing and expertise in the chosen market area.
Technology and infrastructure to deliver value effectively.
Example:
A small artisan bakery may not have the ability to scale its operations to serve a mass market and therefore chooses to focus on a niche market of gluten-free or organic products.
3. Competitor Presence
Importance:
The level of competition in a segment affects how attractive it is. A business must evaluate:
How saturated the segment is with similar products.
The strength and brand loyalty of existing competitors.
Potential for differentiation.
Example:
A start-up developing educational software may avoid the mainstream school market dominated by large firms and instead target home-educating parents or adult learners as a less competitive niche.
4. Product Nature and Differentiation
Importance:
The nature of the product heavily influences the appropriate targeting strategy. Key considerations include:
How specialised or universal the product is.
The level of customisation needed.
Opportunities to stand out from competitors.
Example:
A handmade luxury watch brand would benefit more from niche marketing, whereas a budget smartwatch could be mass-marketed to tech-savvy consumers worldwide.
Real-World Examples of Targeting Strategies
Real-life case studies help to illustrate how different targeting strategies are applied by businesses.
Mass Marketing Example: McDonald’s
Strategy: Targets a broad audience with standardised offerings such as burgers, fries, and drinks.
Marketing Channels: Television ads, global sponsorships, and billboards.
Why It Works:
McDonald’s leverages global branding, consistent menus, and fast service to appeal to a wide demographic regardless of age, gender, or income. It also benefits from high brand recognition and efficient operations to reduce costs and increase profits.
Niche Marketing Example: Lush
Strategy: Targets environmentally conscious consumers who value cruelty-free and handmade beauty products.
Marketing Channels: Ethical branding, eco-friendly packaging, and social media.
Why It Works:
Lush creates a strong identity around ethical production, environmental sustainability, and social values, which resonate deeply with a specific customer base. The emotional connection and shared values result in high brand loyalty.
Differentiated Strategy Example: Apple
Strategy: Apple uses differentiated targeting, appealing to several segments with tailored products.
Segment Examples:
General consumers with iPhones.
Creative professionals with MacBook Pro and Final Cut Pro software.
Students with discounted pricing and user-friendly interfaces.
Why It Works:
Apple maintains a strong brand image across different customer groups by focusing on design, innovation, and user experience. By understanding and catering to each group’s unique needs, Apple secures a broad but targeted customer base.
Key Differences Between Mass and Niche Marketing
To summarise the differences, here’s a breakdown in plain text:
Audience:
Mass marketing targets everyone.
Niche marketing targets a specific group.
Product Strategy:
Mass marketing uses standard products.
Niche marketing customises products to suit the target group.
Marketing Approach:
Mass marketing uses broad messages.
Niche marketing uses targeted, specific messages.
Operational Strategy:
Mass marketing focuses on cost-efficiency.
Niche marketing focuses on value and specialisation.
Examples:
Mass: Coca-Cola, McDonald’s.
Niche: Gymshark, Lush, vegan chocolate brands.
Choosing the Right Strategy
When selecting a targeting strategy, businesses should align their choice with:
Customer Expectations: Tailoring products to fit the exact needs of customers builds satisfaction and loyalty.
Company Vision and Goals:
A business focusing on rapid growth might favour mass marketing, while one prioritising quality or personalisation might choose niche targeting.Competitive Positioning:
If the market is highly saturated, a niche approach may offer a competitive edge. Conversely, a well-funded company with strong branding may succeed in mass markets.Scalability and Flexibility:
Niche markets are often easier to enter but harder to grow. Mass markets require greater investment but offer higher returns if successful.
Understanding and choosing the right targeting strategy is essential for business success. It ensures the company reaches the right people, with the right message, at the right time.
FAQ
Differentiated marketing is a strategy where a business targets multiple market segments, each with a different marketing mix. Unlike mass marketing, which uses a single approach for everyone, and niche marketing, which focuses on one narrow segment, differentiated marketing customises products and promotional strategies for several distinct groups. This allows businesses to broaden their customer base while still maintaining some personalisation. It can increase sales and brand awareness, but also requires greater investment in research, product development, and marketing resources.
Businesses can assess the effectiveness of their targeting strategy using several metrics. Key performance indicators include sales growth within the targeted segment, market share changes, customer retention rates, and profitability from targeted campaigns. They may also monitor brand awareness and customer satisfaction specific to the segment. Analysing conversion rates from segment-specific marketing campaigns can provide insight into targeting accuracy. Regular performance reviews help refine targeting decisions and ensure alignment with overall strategic objectives.
Selecting the wrong target market can lead to ineffective marketing, poor sales, and wasted resources. If the chosen segment lacks sufficient demand or purchasing power, the product may fail to generate expected revenue. Additionally, if the business misjudges customer needs or behaviours, the marketing message may not resonate, reducing engagement. Entering a highly competitive segment without differentiation can also lead to price wars or brand invisibility. In severe cases, poor targeting decisions can damage a company’s reputation and long-term viability.
Yes, businesses often adjust their target markets in response to changes in consumer behaviour, market trends, or internal strategic shifts. This process, known as repositioning, involves market research to identify new opportunities and re-align the product, branding, and marketing mix to suit the new audience. It might include launching a new campaign, modifying product features, or changing pricing strategies. However, businesses must manage such transitions carefully to avoid alienating existing customers while trying to attract new ones.
While declining segments typically have shrinking customer bases, businesses might still target them if they possess unique expertise, strong brand loyalty, or operational advantages in that segment. Often, competition in such markets is low, allowing firms to maintain profitability with minimal marketing spend. Some businesses focus on these segments because of emotional brand connections, long-standing customer relationships, or specialised product knowledge. However, this strategy carries long-term risk, so companies must monitor trends and be ready to pivot if demand further decreases.
Practice Questions
Analyse the benefits to a small business of using a niche marketing strategy rather than a mass marketing strategy. (9 marks)
A niche marketing strategy allows a small business to focus on a clearly defined segment, helping it differentiate itself and build strong brand loyalty. Since niche markets tend to have less competition, it reduces pressure from larger firms. Tailoring products and marketing to specific customer needs also increases customer satisfaction. Additionally, marketing budgets can be used more effectively by targeting a smaller, more responsive audience. This can improve return on investment and reduce wasted spend. However, the small size of the segment could limit revenue, so the firm must assess whether it can sustain itself in a narrow market.
Explain how the level of competition in a segment can influence a business’s targeting decision. (6 marks)
High levels of competition in a segment can discourage a business from targeting it due to lower chances of success and reduced profit margins. Established rivals may already have strong customer loyalty or economies of scale that make it difficult for new entrants to compete. Instead, a business may prefer segments with less intense competition, where it can differentiate its offering and more easily gain market share. However, such markets might be smaller or less profitable. Ultimately, the business must weigh competitive intensity against its own strengths to determine whether targeting a specific segment is viable.
