SCORE

Counselors to America’s Small Business
TARGET MARKETING
Who are your best customers? Where should you direct your marketing activities?
Where and how should you allocate your advertising and promotional efforts?
Target Marketing, provides Focus for your business. It helps to establish critical
operational goals and defines what must be done to achieve them. It shows how the
different parts of the business contribute to achieving profitable sales levels. It provides a
useful framework for coordinating all of the different activities within your business
towards greater profits.
Target Marketing helps you to understand and identify the specifics of what needs
to be done to reach your objectives. Target Marketing is both a planning and an action
tool. The process is straightforward. Plan what needs to be done, then implement the
specific activities needed to turn these plans into reality.
Target Marketing, while not a failsafe system, when carefully done can
significantly contribute to the growth of your business. Large firms spend millions of
dollars and employ highly specialized staff to perform complex marketing analysis
activities. However, success here is not a matter of spending a lot of money or even
employing sophisticated staff. It is, instead, the result of the careful application of some
basic principles. These are principles, which a small firm can apply with the same
benefits experienced by larger organizations.
Smaller firms often have a competitive advantage over larger firms with today's
more specialty niche market environment. An overall market environment made up of
unlimited specialty wants and needs has developed with markets made up of smaller
numbers of target customers. Smaller firms can take advantage of this market shift by
specializing in addressing the needs of very precisely defined, smaller target markets.
Large firms may be less capable of providing such specialty products/services because
they need volume operations to support large overhead and capacity costs.
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By keeping a hand on the pulse of their market, the smaller firm, by virtue of its
size, can typically respond much more quickly to changes in consumer preferences than
larger firms, and so possesses a further extremely critical advantage.
These advantages are not to be taken lightly, or thought to be unachievable. They
are available to smaller firms that take the time and effort to understand their competitive
advantages, and tailor their offerings to carefully selected target segments.
As described here, Target Marketing can be a simple, direct, and effective eightstep process that will help identify those segments of the market most apt to become your
customers. Once these segments are identified, developing the rest of the marketing
strategy can follow. The target customers themselves help to define much of the
marketing approach.
Successful target marketing requires a certain attitude or philosophy towards the
business as well as the performance of various activities. If you adopt the attitudes and
apply the techniques described on the following pages, you will save money, gain better
results from your sales efforts, and find more profits at the end of your next fiscal year.
The method is proven and safe. Its success depends entirely on you.
What Customers Want
Marketing is more than an activity, it is an attitude, a philosophical approach
governing all of the decisions made by and for the business.
Instead of trying to get customers to buy what the firm likes to make, or happens
to have on hand, the marketing oriented firm tries to produce or sell what its customers
want which can be sold at a profit.
Obviously, there are some limitations to the application of this concept by an
existing business. You are not going to simply throw out everything that you now have
and replace goods or production machinery with completely new items. However, as you
analyze your market and customer profiles, and so gain an understanding of their wants,
desires, and perceived needs, you can begin to reorient your business over time to take
best advantage of these new insights. Consider both the short term and long term
implications of developing and implementing the right Target Marketing strategy for
your business.
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Customer Attitudes
For a long time, people have believed that advertising can be used to change
people's minds about what they want. This is an incredibly difficult process at best, and
an extremely expensive one. Because of these two factors, it is a process that most
smaller firms simply cannot afford to pursue. Instead, it is much more productive for any
size firm to tune in to target customer attitudes as they currently exist. Once they have
identified the actual prevailing attitudes, they can begin to organize company resources
needed to constructively address and satisfy these attitudes. So, the key question is,
"What are the existing customer attitudes?"
With this as an objective, developing an understanding of existing customer
attitudes becomes essential, and their identification becomes an important part of the
marketing process. Once these customer attitudes, needs or preferences are identified, the
entire firm can then organize itself to satisfy these needs as completely and efficiently as
possible. Of course, smaller firms cannot possibly expect to satisfy everyone. The ones
that try frequently end up not satisfying anyone. Larger firms often have the same
problem.
A firm must know its limitations and strengths. A well- focused firm can move
quickly, economically, and accurately into a target market niche. The limitations that are
relevant are generally money, time, personnel, skills, and suppliers. It is important that a
firm not attempt to aim at a market it cannot service effectively.
It is important to understand that this is an ongoing process. People, products,
needs, wants, and populations change and shift. Competition adds extra pressures on
marketing behavior. In order to stay in the game, all firms must remain sensitive to the
forces and consequences of change. Remain tuned in to the wants and needs of your
consumer.
Having invested the effort to accurately identify the optimum use of resources
based on strengths and weaknesses, and having defined the ideal target market based on
perceived customer attitudes, it will now be possible to organize the firms activities to
effectively meet and satisfy target customer's needs and wants.
Organizing your firm's marketing related activities to perform a clearly defined
task is central to satisfying your customer wants and needs. Knowing your market and
having a feel for what it wants will help you understand what to produce or what service
to offer to meet those wants in a profitable manner.
Knowing what objectives to aim for begins to form a strategy for getting there.
Make the objective as clear and measurable as possible. A clearly stated and understood
objective is far more likely to be reached satisfactorily than one that is loosely defined
and unclear.
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Why Target Marketing?
The idea is simple enough. Every business has a potential market out there
somewhere within that broad, fuzzy, agglomeration of persons and organizations who
might conceivably be induced to buy your product, service or merchandise.
Why Target Marketing? Think of a target. The bull's eye is small yet, in
sporting events, represents the highest points or value when impacted. The first ring
just outside of the bull's eye, is a bit larger and easier to hit, but not quite as valuable
as the bull's eye. The next ring is larger still, yet represents even less value and so on,
as you move outward on the target rings away from the bull's eye. Once off the target,
there is no value at all.
Now, suppose that you need $100 in sales to breakeven. You have a limited
number of marketing dollars to invest in attracting these sales -say $15. For the sake of
this example, think of each marketing dollar as an arrow. Every bull's eye will net you
$10 in sales, the first ring will net $5, the next $3, and the outside ring $1.
It is not difficult to conclude that it will require a few bull's eyes to reach break
even. Therefore, how do you best proceed? While it would not be wise to just blindly fire
your arrows randomly, this is exactly what many companies do with their sales/marketing
efforts. To ma ximize your chances of success and minimize your chances of failure, you
not only have to take careful aim with each arrow, but must know the potential return of
what you are aiming to achieve.
It is important to note that because many businesses offer more than one
product/service, they may be shooting at more than one target at the same time. A good
example is an automobile dealership that sells more than one brand of car. There is
nothing to preclude your aiming at several. It is only critical that you be aware of exactly
what you are doing, as such choices profoundly affect your overall strategy. You will still
have only a finite number of arrows (marketing dollars) no matter how you allocate them.
If you are fortunate eno ugh to have a product or service, which appeals to more than one
market profitably, then by being aware of each market as a separate target, you will
almost undoubtedly be able to market your product or service more effectively.
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Target Marketing - Eight Steps
The eight steps approach to Target Marketing is designed to help you develop the
accuracy you require to be successful in your marketing and sales activities. Since these
steps are part of a process, they are interrelated. One step leads to the next and yet later
steps may suggest changes needed in earlier conclusions. It is also important to note that
these steps will not lead to any permanent conclusions. The resultant ideas must be
continually and consistently reworked if the marketing effort is to be successful over the
long term. Change is endemic in the business environment and, to remain effective, any
firm must stay tuned to changes and be prepared to modify its own strategies as old ones
begin to lose their effectiveness. The key is reading, thinking, then applying.
STEP 1: Define the Product/Service
The first step is at once the most important and the most difficult. The business
has a product or service to offer, in many cases more than one of each. Each product or
service must be carefully studied to determine what is special about it. Once the firm has
done this, it must deal with the underlying question of why people should buy from this
business rather than some other. What does this firm do that is singular or unique, that
sets it apart from all other firms? What constellation of skills and resources does it have
that gives it the potential to do other things as well?
The products or services the firm has are the most obvious constraint on what
markets it can reach. These are followed closely by the range of skills and other resources
available within and external to the firm. These are the basic parameters to finding the
Target Market, especially for a growing company.
There is an additional perspective that must be added here. It is important for the
firm to view its product or service within the context of the total business operation, as a
collection of assorted services and related benefits, such as credit, delivery, custom
colors, special handling, or others, in addition to the primary product or service when
defining the target market.
It is this unique combination of product skills and resources that allow a
smaller firm to differentiate itself from its competitors, large or small, and to identify
target market segments that it can serve especially effectively, frequently, far more
successfully than larger firms with more resources, who are less focused!
This kind of comprehensive conceptual analysis of the firm will allow you to
begin to identify your true marketing advantages and benefits. It is the reason most firms,
even smaller firms, that sell a standard product or a fairly standard service can have a
unique appeal to some particular customer group. The smaller firm must recognize this
unique capability and not feel compelled to compete on a direct, head-to- head basis with
its bigger competitors. Typically, it is not necessary to do so, even if the smaller firm
could marshal the resources required to compete directly.
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STEP 2: What Wants/Needs are Satisfied
Before the firm can consider whose wants or needs are best satisfied by its
product or service, it must determine how the product or service can satisfy. What needs
does it meet? What wants can it fulfill? This step permits the product or service to be
viewed from a slightly different angle. Any given product or service will probably satisfy
a variety of wants or needs. The business should list all it can possible identify. The more
useful applications you can identify for your product/service, the greater the potential
market dimension.
Constructing the list is almost an abstract exercise in creative thinking. In order to
get the maximum benefit from this activity, the firm should go beyond its traditional way
of viewing its offerings and try to imagine as creatively as possible other areas of
application that could be relevant. A thorough job here will lead the way directly into the
next step.
Motives for buying include imitating others and a desire for style, profit,
convenience, knowledge, or comfort. There are often hidden motives for buying. These
include attitudes, colors, shapes, symbols, quality, and packaging. It is important to note
that these motives must be viewed from the perspective of the consumer, not the seller.
That is, consumers buy mainly based on their interpretation of the perceived benefit they
will gain versus some tangible product/ service feature.
This step is easy to apply simply by reviewing this list item by item, and then
making a note of which wants, motives or motivators are operant on each product or
service you offer. While you are doing this, keep asking yourself who would be
responsive to these factors. This process will then lead right into the next step.
STEP 3: Identify Market Segments
At this point, you have considered three important factors; an identification of the
product/service, the product/service appeal factors, and a rough list of potential
customers. We will now refine the third factor by addressing in more detail, who might
want/need these products/services.
Suppose the firm is selling baby food. If this is the case, the firm would be
marketing, among other things, something that meets a biological need and represents a
convenience. The firm is also selling its knowledge of what babies need to eat and will
probably package the product in glass, because most parents want to see what their
children are going to be fed. As an added bonus, glass reflects an image of cleanliness,
quality, and honesty all of which are very desirable attributes.
Everyone knows that baby food is for babies, but in another sense, anyone could
eat baby food. Although this is true, some groups are more logical users of baby food
than others and so would require less selling than others. This consideration paves the
way for the rest of the target marketing activity.
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The primary prospects for purchasing baby food are young mothers, who
traditionally do the shopping for their families. Fathers and others are considered
secondary purchasers. The important question here, though, is who could use this
product? Baby food is almost predigested. It is bland, salt free, and of a particular smooth
consistency. Who else would want such a product? Some suggestions include people on a
special diet, people with ulcers, the elderly, people with colitis, and athletes with broken
jaws. Some of these groups may represent such diminutive markets consisting of so few
people that they are not worth pursuing. On the other hand, they may represent a more
than adequate market for a smaller specialty firm.
The point is that by keeping product characteristics firmly in mind, it may be
possible to identify special groups with different motives that could view the specific
product or service to be of great interest to them and so buy it, creating an additional
worthwhile target market opportunity.
STEP 4: Segment (Differentiate) the Market
The very process of identifying the characteristics of potential customers begins
to segment the market. Segmenting the market means to divide it into classes or
categories of people or firms based on different sets of factors, characteristics, or other
considerations. It allows an identification of where these potential customers are and how
many of them there are. Identifying them will lead to the formulation of productive
marketing approaches to these groups. As this market segmentation process progresses,
what at first appears fuzzy, begins to develop into clearly defined target consumer
groups. It will also become clear that some groups are very directly customers and some
will probably never be customers.
There are a myriad of ways of evaluating a target market, such as economic,
socioeconomic, geographic, demographic (age, sex, race, education, occupation), lifestyle, and others. Whatever the differentiating characteristics may be, a useful way to
organize all the information is to construct a grid. A Market Grid is a simple matrix that
will help you to visualize market segments in greater detail and assist you in more clearly
identifying the target market. See example on page 11 of this report.
To construct a market grid, list on one side of the matrix the want/need motive
factors that seem most appropriate to the product/service offering. On the other axis, list
the market segments that seem the most reasonable or most logical targets. This is a first
approximation approach. It is an educated guess, one informed by the preceding steps and
guided by experience.
The second approximation refines the first by checking all assumptions on the
matrix. Where there is an intersection of market segments with the want/need motive
factors, that square on the matrix may be shaded partially or completely to indicate both
that fact and the degree of intersection. The vertical axis lists product features, and the
horizontal axis lists potential market segments, defined by both socioeconomic and lifestyle factors.
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Using a matrix or Market Grid, is a very useful analytic tool and can be applied to
a variety of problems, from defining market segments to helping develop a strategy to
cover the most profitable segments of the market. Ingenuity is the only constraint.
STEP 5: Rank Differentiated Segments
The goal is profit. Therefore, since some of the market will be easier to sell to at a
given price than others, they should be the primary targets. Again, it is important to have
increased profitability rather than increased sales as the goal of the firm.
The factors affecting profitability are:
• Direct Sales Cost
• Indirect Sales Cost
• Distribution & Logistical Problems
• Pricing (Some segments may be more price sensitive than others)
• Size of Segment
• Ease of Selling to a Given Segment
• Image of the Firm in the Market
• Sales Personnel- Skills and Weaknesses
It is also critical to ensure that there is a sufficient market to support the goals of
the firm. Returning to the "arrow/target" analogy, if there is not enough market in the
bull's eye, the firm must aim at the next ring as well.
There may be additional relevant profitability factors applicable to your business.
Once they are all identified, each factor is to be assigned a different weight relative to its
perceived importance.
STEP 6: Evaluate Segment Mixes
Once the market grid approach has been used, and you have been able to
differentiate your market into numerous segments and have ranked them, Step 6 becomes
almost automatic. All the pieces of the puzzle have been identified.
The trick now is to assemble them into a pattern that will produce the greatest
return for the least effort in terms of time and money. If a great deal of guesswork has
been involved up to this point, the results may be highly questionable. The more that
assumptions can be correlated with reality, the better the quality of the final decision.
Consider what different combinations of segments might be like. Can members of
different groups be reached through the same media and with the same appeal? Everyone
likes comfort, but is that too broad an objective? This process requires strategic thinking.
By reworking the ideas a few times, new ideas may crop up and old ideas may be
strengthened, discarded, or adopted. Whatever the decision, it needs to be the result of a
structured process to be as valid as it can be. Sometimes a single segment will represent
enough demand and opportunity. More often though, multiple segments will be
assembled to constitute the customer base.
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It is essential to know what you do well and what your competitive advantage is
so that you are not lured into areas where you simply cannot compete. For example, a
specialty grocery store may exist comfortably by serving a local specialty market with
unusual food and condiment offerings. It would be a mistake for this operation to attempt
to compete with the local supermarket because it does not possess the buying power that
allows a larger operation more flexibility in establishing its prices. However, were it to
offer more service features, such as home delivery, it realistically could increase its
market share. Know what you do well, then do more of it.
STEP 7: Formulate Strategy
By now, all the necessary parts for an effective market strategy have been
assembled. The most desirable market segments have been identified and profit
objectives have been tied to those segments. Now the focus is how to attract these
segments or target markets, so that they will purchase the firm's products/services at a
level that is profitable for the business. This process is also referred to as market
penetration
Formulating the appropriate strategy can be both a creative and an entertaining
process. There are only a relatively limited number of ways to promote a product:
personal selling, advertising, direct mail, and combinations and permutations of these.
People who cannot formulate some clear ideas on how best to sell their products or
services probably shouldn't be in business. The ideas they try out of desperation or
default may prove to be wrong. However, even if wrong, strategies can always be
changed. The worst strategy is no strategy at all.
STEP 8: Execute Strategy
Action is a critical component of any market strategy. Without action, the analysis
and the planning are a wasted effort. Many times the marketing efforts, and other
management activities, get stalled here. The strategy has been developed, the segments
evaluated, the overall scheme approved and then shelved. It is important not to fumble at
this point. If professional help is needed, it should be utilized.
Many firms need professionals to help with their advertising. However, a
professional campaign costs money and advertising takes time to produce results. It is
false economy to try to save here by taking a do-it-yourself approach. Also, if the
preceding steps have been taken with care, the cost of these professionals can be
minimized and the level of their contribution maximized. Much of the work they would
normally do has already been done for them.
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Stick To Your Plan. It is critical not to scrap it prematurely. If the plan was
carefully thought out, it deserves a chance. At the same time, it is important not to follow
it blindly into some form of oblivion. Results may take time. However, even when this
lag is anticipated, it is still frightening, and the temptation is to go quickly to something
else. Generally, this something else is not so well thought out, and will lead to disaster.
The correct move for this as well as all management strategies, is to monitor and control
the activity once it is under way.
Summary
Target Marketing provides direction for all sales activities. It helps to make the
most efficient use possible out of the scarce resources of time and money, and helps to
clarify what must be done in order to reach objectives.
The eight steps process outlined here provide a simple, direct, and effective
procedure to help identify those segments most apt to become real, profitable customers
of the business. Once these key segments have been identified, developing the rest of the
marketing strategy is greatly facilitated.
Success here is not a matter of spending a lot of money, or even having a
sophisticated staff. It is, instead, the result of the careful application of some basic
principles. These are principles that a smaller firm can apply and receive the same
benefits experienced by much larger organizations.
Source: U.S. Small Business Administration.
Edited by SCORE 471
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MARKET GRID EXAMPLE
INSTRUCTIONS:
1. Name the product and list the nine most prominent product features in the space
provided
2. List the five most prominent market segments identified
3. Using a scale of 1 to 5, where "1" represents the least important perceived product
feature and "5" represents the most important product feature relative to
perceptions of each target market, assign one number only to each market
segment within the grid
4. Total each of the five market segment columns
5. Write down your conclusions relative to how each target market is scored, with
the highest total representing the most attractive initial target market to pursue
Product Name : ____________________________________________________
Product Features
1.
2.
3.
4.
5.
6.
7.
8.
9.
Market Segments
Assigned Scale
I
II
III
IV
V
Column Totals:
Market Segments:
I __________________________________________________________
II__________________________________________________________
III_________________________________________________________
IV_________________________________________________________
V__________________________________________________________
Conclusion:
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