AN OVERVIEW OF MARKETS AND TARGET MARKET

A market is the collection of people or organizations with (a)
needs to satisfy (b) money to spend, and (c) the willingness to spend it. You
should however understand that, within a total market, there is usually
some differences among the buyers. For instance, not all consumers who own cars
want to buy Peugeot brands, and not everyone who wears skirt suits wants to pay
the same price or purchase them
from boutiques. While some Consumers visit the beach in order to rest and
relax, others do so for adventure and excitement.

The
illustrations above show that within the same general market, there are groups
of customers with different needs, buying preferences or product use
behaviour. We may discover that
in some markets, these differences are relatively minor. Here, the primary
benefit sought by consumers can be satisfied with a single marketing mix. In
other markets, however, customers’ interests may not be completely satisfied by
a single marketing mix. 

Consequently, alternative marketing mixes are required
to cover the entire market. Whatever its
size, the group of customers for whom the seller designs a particular marketing
mix is a target market.

Generally,
there are two alternative target-market strategies. The first alternative is to treat the total
market as a single unit, that is, as one mass, aggregate market. This strategy
is premised on the assumption that, in spite of their differences, everyone in
the market can be adequately satisfied with one marketing mix. Hence in mass marketing, the
seller engages in mass production, mass distribution, and mass promotion
of one product for all buyers. Thus, the argument for mass marketing is that it creates the largest
potential market, which leads to the lowest costs, which in turn can lead to lower
prices or higher margins. This strategy employs a “short run”
approach (i.e. are programme, broad
target) in marketing activities.

In the second alternative, the total
market is seen to consist of several small er segments with differences significant enough to the
extent that one marketing mix will not satisfy everyone or even a majority of
the market. In situation like this, since the firm typical y cannot meet the
needs of all these submarkets, one or more are often selected as target
markets. This is sometimes described as a” rifle” approach (i.e.
separate programmes, pinpointed targets).

The truth is
that the notion of an aggregate market is relatively uncommon. For instance, the proliferation of
advertising media and distribution channels is making it difficult to practice “one size –fits all” marketing. It has even been claimed that mass
marketing is dying. It is not surprising therefore, that many firms are turning
to micromarketing at one of four levels: segments, niches, local areas, and
individuals. We shall be looking at these levels of market segmentation under
the section that follows.

MARKET SEGMENTATION

What we have been stressing up to this point is that, markets consist
of buyers, and these buyers differ in one or
more respects. For instance they may differ in their wants, resources,
geographical locations, buying attitudes, and buying practices.

Customer-oriented firms take these differences unto
consideration. However, you should note that these firms usual y cannot afford to tailor-make a
different marketing mix for every customer in this regard, most marketing mix
are for all and a
different one for each customer. This usual y involves market segmentation,
which is a process of dividing the total market for a good or service into
several smaller groups, such that the members of each group are similar with
respect to the factors that influence demand. It has been found that a major
element in a firm’s success is the ability to segment its market effectively.

BENEFITS OF MARKET SEGMENTATION

Since market segmentation is customer-oriented, it can be said to be
consistent with the marketing concept. For instance, when segmenting the
needs of customers within a submarket are first identified, before deciding if
it is practical to develop a marketing mix to satisfy those needs.

In general, market
segmentation has been found to be a valuable technique for a number of
reasons:

(i)   
Efficient use of Marketing Resources

By matching
marketing programmes with individual market segments, management can do a better marketing job thereby making more efficient use of its marketing resources. For instance, small firm
with limited resources might compete very efficiently in one or two small market
segments, whereas, the same firm would be overpowered by the competition if it
aimed for a major segment. Even the largest firms are also constrained in one
way or the other: they don’t have enough marketing personnel, advertising
money, new products and
other resources to reach the entire world. Thus, by using market segmentation,
they can deploy resources efficiently to create variations of the marketing mix
that fit only the most attractive market subsets. The result is more efficient marketing, which saves money
and increases sales.

(ii)   
Better understanding of customer needs

There is no doubt that, it is pretty
difficult to attempt to understand customer needs in a large and diffuse
market. However, through market segmentation, it is possible to split or divide
the market into segments whose needs are easier to define. Efforts can then be geared toward satisfying these
needs.

(iii)   
Better understanding of the competition situation

Firms who
target individual marketing segments can see more clearly who their competitors
are, and the tactics each uses in that segment.

(iv)    
Accurate measurement of goals and performance

Market
segmentation also allows accurate measurement of goals and performance. For instance, a recording company
might set sales goals and measure performance by the number of records, tapes,
or compact discs it sells, but won’t know how it is doing in comparison with
competitors. If, however, the company specializes in the reggae music market,
it can define its goals more specifically. One objective might be to sell enough
of a single album to break into the listing of top 100 best selling albums. 

The
company might also want to measure how many of its records make the bestseller
chart in a given year. Because
the company has defined its segment as reggae music, rather than as music in
general, the company has an objective way of setting standards and measuring
achievement. This can be
likened to the popular saying of Jack of all trades, master of
none”.

In a nutshell, the benefit of marketing
segmentation is that it leads to more satisfying marketing results. For
instance, once you have analysed a market and analysed its natural division, you can pick out the
segments that are most likely to lead to marketing success. Though segmentation may take a
little longer time than just rushing to the market, its rewards are worth the
extra time.

CONDITIONS FOR EFFECTIVE SEGMENTATION 

Market segmentation involves more than just
thinking of a segment to target. As you should now understand, the purpose of
using market segmentation is to end up with segments in which marketing can be
conducted more efficiently and effectively. Three conditions help marketers
move toward this goal:

(i)                
The
basis for segmenting, i.e. the characteristics used to describe what segment
customers fall into must be measurable. The data describing these
characteristics must also be obtainable. For example, the age of
customers is both measurable and
obtainable. Though another variable such as the “desire for ecological y
compatible products” may be useful in segmenting the market for disposal
drapers that are biodegradable. It is neither easily measurable nor data easily
obtainable.

(ii)       
A
segment is meaningful only if it can be reached with a marketing programme.
Hence, the market segment should be accessible through existing marketing
institution (such as middlemen, advertising media, company salesforce) with a minimum of cost and wasted effort.

(iii)      
Each segment should be large enough to be
profitable. The point here is that organization should always consider operating in profitable segments. 

Viewed from a customer-oriented perspective, the ideal method for segmenting a
market should be on the basis of customers’ desired benefits. This position is
consistent with the idea that a firm should be marketing benefits and not just
the physical characteristics of a product. However, in many cases, the
benefits desired by customers
do not meet the first condition described above (i.e. measurability and
obtainability of the characteristics used in describing segments). This is
because customers are not willing or unable to reveal them. For example, what
benefits do people derive from taking beer? Put in another way, why do others
refuse to take beer?

At times when benefits
are identified, as in focus-group studies, it is often difficult to determine
how widely they exist in the market.

Consequently, a variety of indirect
indicators of benefits are often used to describe segments. These
indicators, such as age, are not the reason customers buy, but they are easily
measured characteristics that people seeking the same benefit frequently have in common. For
example, middle-aged people are more likely to read financial standard than
teenagers, not because they are middle-aged but because the content of the
paper is more directly relevant to their lives. Hence, marketers of financial
standards will find it easier to measure age than relevance, so age becomes a
segment at its variable. In the sections that fol ow, we shall be discussing many
of these commonly used, indirect bases for segmentation.

  ULTIMATE CONSUMERS AND INDUSTRIAL
MARKETS 

A company can segment its market in many
different ways. Usually, the bases for segmentation vary from one product to
another. The broadest market division is that which separates a potential
market into two categories: ultimate consumers and industrial users. The sole
criterion of this segmentation is the customer’s reason for buying

Ultimate
consumers buy goods or services for their own personal or household use, and
are satisfied strictly non-business wants. They constitute what is known as the
“consumer market”

Industrial users on the other hand,
are business, industrial, or institutional organizations that buy goods or
services to use in their own organizations, to resel , or to make other products.

 DIFFERENCE BETWEEN ULTIMATE CONSUMERS AND INDUSTRIAL USERS AND INDUSTRIAL USERS

There are important differences between ultimate consumers
and industrial users, their ways and means of purchasing differs considerably.
Only a few of the many difference will be considered here:

Ultimate
consumers buy in much smaller quantities and generally for consumption over much shorter time periods than
do industrial buyers. More importantly, ultimate consumers are not usual y as
systematic in their buying as are industrial users. Some industrial users are
business enterprises which exist to make points, thus encouraging them to adopt
systematic purchasing procedures. 

Though other industrial users are non-profit
institutions (e.g. government agencies, schools, hospitals, clubs, societies,
etc), their operations
are audited and reviewed by outside authorities. These also make them adopt
systematic purchasing procedures. In addition, ultimate consumers spend only
part of their time
buying, whereas the industrial user employs professionals who devote all of
their time and effort to
purchasing. Furthermore, the ultimate consumer spread all his buying skill over
a wide range of goods
and services, whereas the professional tends to specialize and, therefore,
has more opportunities to perfect his purchasing skills.

These few differences clearly illustrate the point that marketers must use significantly different approaches in
marketing goods and services to each of the two broad classifications of
markets.