Targeting in Market Segmentation

    Once different possible market segments have been identified for a particular industry, the next step is to select the segment that can be most sensibly targeted.

    There is no hard and fast science to the selection process. In the end, it is primarily the result of informed assessment and analysis. Some tips that come into play are:

    • Always consider a firm’s size and growth objectives when selecting a market for it to target. If there is a need for high growth, then there is a need to select a market that offers such a capacity for growth. On the other hand, if the firm chooses to grow gradually in order to minimize the strain on limited resources and working capital, then a small market may prove to be more practical. If the firm chooses a market that is larger than it can handle, this could be counter-productive because it may end up attracting powerful competitors into its identified market.
    • Assess the structural attractiveness of the potential market. Is it easy for anybody to enter this segment? Will it attract competitors? Will the market have tremendous bargaining power over the firm (like in the case when the segment can actually band together and become a pressure group)?
    • Identify the firm’s objectives and resources. Make sure that targeting a particular segment would be in line with the firm’s objectives and will not drain its resources too much.
    • When planning for a long-term growth, immediately assess the segment’s potential for economies of scope. For instance, if you are a shoe manufacturer and targeting the children’s school shoes market but have a long-term dream of providing shoes across different age groups, will the machinery and resources required for making school shoes be the same machinery needed for making adult shoes? If not, then you may not have economies of scope when starting with this segment.
    • By the same token, there is also the issue of segment-by-segment invasion. Certain segment movements are acceptable, while others are not. In fact, a brand that is best known for children’s shoes may find it far more difficult to penetrate the adult market than it would be for adult shoes to penetrate the children’s market. The acceptability of movements tends to be cultural in nature, so it helps to have empathy toward the opinions of the target markets.

    By keeping the above pointers in mind, strategic business plans can be developed around the spotting of opportunities in underserved and under-marketed segments in the industry.

    Can you target multiple markets? The answer is yes, provided that the brand targets these discrete markets with distinct strategies. In his book The Tipping Point, Malcolm Gladwell notes the case of the highly popular Airwalk shoes. The shoes targeted both trendsetters (which is a small segment of the population) and a bigger mainstream market. It did so by offering cutting-edge shoes to specialty stores that the trendsetters went to while offering more “homogenized” shoes for the mainstream market. In doing so, Airwalk kept both markets happy. Unfortunately, the company eventually decided to simplify its operations by offering the same kinds of shoes to everyone. At this point, sales began to plummet as the trendsetters (who served as powerful influencers) realized that they were no longer getting special shoes and therefore lost interest in the brand. (Gladwell 2002)

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