The Ultimate Guide to Defining Your Target Market

Updated: Jan 21

If you have something to sell, naturally you need to find the right buyers. There is a strategy to doing so, called “segmenting.” Think about who may want to buy your product, and why.

  • Behavioral segmentation: What benefits do customers want, and how do they use our product?

  • Demographic segmentation: How do the ages, races, educational level, and ethnic backgrounds of our customers affect what they buy?

  • Geographic segmentation: Where are our customers located, and how can we reach them? What products do they buy based on their locations?

  • Psychographic segmentation: What do our customers think about and value? How do they live their lives?

Selecting Target Markets

After you segment your buyers and develop a measure of consumer insight about them, you can begin to see which groups have the most potential. Now you are hunting with a rifle instead of a shotgun. The question is, do you want to spend all day hunting squirrels or ten-point bucks? An attractive market has the following characteristics:

  • It is sizeable (large) enough to be profitable given your operating cost. Only a tiny fraction of the consumers in China can afford to buy cars. However, because the country’s population is so large (nearly 1.5 billion people), more cars are sold in China than in Europe (and in the United States, depending on the month).

  • It is growing. The middle class of India is growing rapidly, making it a very attractive market for consumer products companies. People under thirty make up the majority of the Indian population, fueling the demand for “Bollywood” (Indian-made) films.

  • It is not already swamped by competitors. Have you found a way to make your product stand out in a crowded field?

  • Either it is accessible or you can find a way to reach it. Accessibility, or the lack of it, could include geographic accessibility, political and legal barriers, technological barriers, or social barriers. For example, to overcome geographic barriers, the consumer products company Unilever hires women in third-world countries to distribute the company’s products to rural consumers who lack access to stores.

The company has the resources to compete in it. You might have a great idea to compete in the wind-power market. However, it is a business that is capital intensive. What this means is that you will either need a lot of money or must be able to raise it. You might also have to compete against multimillionaires with deep pockets. Does your organization have the resources to do this?

  • It “fits in” with your firm’s mission and objectives. Consider TerraCycle, which has made its mark by selling organic products in recycled packages. It wouldn’t be a good idea for TerraCycle to open up a polluting, coal-fired power plant, no matter how profitable the market for the service might be.

Selecting the Best Target-Market Strategy

Mass Marketing

Henry Ford proved that mass marketing can work—at least for a while. Mass marketing is also efficient because you don’t have to tailor any part of the offering for different groups of consumers, which is more work and costs more money. The problem is that buyers are not all alike. If a competitor comes along and offers

Multi-segment Marketing

Most firms tailor their offerings in one way or another to meet the needs of different segments of customers. Because these organizations don’t have all their eggs in one basket, they are less vulnerable to competition. Marriott International is an example of a company that operates in multiple market segments. The company has different types of facilities designed to meet the needs of different market segments. Some of the Marriott brands and their target markets are as follows:

  • Marriott Courtyard. Targeted at over-the-road travelers.

  • Ritz-Carlton Hotels. Targeted at luxury travelers.

  • Marriott Conference Centers. Targeted at businesses hosting small- and midsized meetings.

  • Marriott ExecuStay. Targeted at executives needing month-long accommodations.

A multi-segment marketing strategy can allow firms to respond to demographic changes and other trends in markets. A multi-segment strategy can also help companies deal with the product life cycle issues. If one brand or product is “dying out,” the company has others that can still compete.

Concentrated Marketing

Some firms—especially smaller ones with limited resources—engage in concentrated marketing. Concentrated marketing involves targeting a very select group of customers. Concentrated marketing can be a risky strategy because companies really do have all their eggs in one basket. The auto parts industry is an example. Traditionally, many North American auto parts makers have supplied parts exclusively to auto manufacturers. But when auto companies experienced a slump in sales following the recession that began in 2008, the auto parts makers found themselves in trouble. Many of them began making and selling parts for wind turbines, aerospace tools, solar panels, and construction equipment.

Niche Marketing

Niche marketing involves targeting an even more select group of consumers. When engaging in niche marketing, a company’s goal is to be a big fish in a small pond instead of a small fish in a big pond. For example, Hohner has an 85% share of the harmonica market.


Microtargeting, or narrowcasting, is a new effort to isolate markets and target them. It was originally used to segment voters during elections, including the 2008 U.S. presidential election. Microtargeting involves gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive. One company that compiles information such as this is Acxiom. For a fee, Acxiom can provide you with a list of Hispanic consumers who own two pets, have caller ID, drive a sedan, buy certain personal care products, subscribe to certain television cable channels, read specified magazines, and have income and education levels within a given range. Clearly, microtargeting has ethical implications and privacy issues.

Your Best Target

A market worth targeting has the following characteristics:

  1. It’s sizeable enough to be profitable, given your operating costs;

  2. It’s growing;

  3. It’s not already swamped by competitors, or you have found a way to stand out in the crowd;

  4. It’s accessible, or you can find a way to reach it;

  5. You have the resources to compete in it; and

  6. It “fits in” with your firm’s mission and objectives.

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