A target market is a group of consumers identified as likely purchasers of a company's product. Typically, this group differs from other consumers based on factors like demographics, behavioral patterns and lifestyle characteristics. Choosing a target market is important because it enables the firm to direct its resources to those customers with high potential for sales growth, interest in the product and loyalty to the brand.
Is a Target Market Necessary?
It is not necessary for a firm to choose a target market; its product can simply be promoted and distributed in the same way to all potential buyers. This mass-market approach was used widely in the past, notably in categories like snack foods and soda.
But mass marketing has fallen out of favor as more and more companies have become concerned with wasting resources on consumers who have little interest in their product, or who are loyal to competitive brands. The target market approach is an important means of boosting efficiency.
Target Marketing Finds Growth Potential
A small group of consumers can offer the firm a large opportunity to grow sales. One target audience example is that relatively few ice cream buyers are lactose-intolerant (unable to digest milk), but that group could generate big profits for a maker of milk-free ice cream substitutes. A product designed for this target market will easily capture their business.
Target Marketing Builds Interest
Another example of the importance of a target audience is that consumers in a target market share various characteristics that make them more likely than other consumers to show interest in the firm's offering. These characteristics may be demographic, like gender, age and income level; behavioral, like employing heavy usage of the product; or lifestyle-related, like concern about staying fit. For example, one possible target market for athletic shoes may be composed of adults who are younger, healthier and more involved with sports than their peers.
Target Marketing Creates Brand Loyalty
Promotional resources can be concentrated on a target market, while the advertising message is designed specifically to resonate with consumers in that group. Also, a target market for Firm A is less likely to get the same level of attention from Firms B and C. Together, these factors improve the potential for brand loyalty.
Target Marketing Keeps Firms Competitive
By focusing tightly on a target market, the company can establish itself as an expert on the wants and needs of that group. It is able to react quickly to changes in their interests or opinions, and keep a careful eye on attempts by other firms to lure those customers away.
Overall, its solid presence in the target market will act as a barrier to competitors seeking to enter the same market, and retaining a competitive edge may be one of the most important benefits of target marketing.
Amy Handlin has been writing about government, business and politics since 1999. She is the author of "Be Your Own Lobbyist" and "Government Grief: How to Help Your Small Business Survive Mindless Regulation, Political Corruption and Red Tape." She is also a state legislator and associate professor. Handlin graduated from Harvard and holds advanced degrees in marketing from Columbia and New York University.