Target market

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Market specialization is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, technographic, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services.

A product focusing on a specific target market contrasts sharply with one following the marketing strategy of mass marketing.

Defining a target market requires market segmentation, the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics.

The market segmentation process includes: 1. Determining the characteristics of segments in the target market. Then separating these segments in the market based on these characteristics. 2. Checking to see whether any of this market segments are large enough to support the organization's product. If not, the organization must return to step one (or review its product to see if it's viable). 3. Once a target market is chosen, the organization can develop its marketing strategy to target this market.

[edit] Evaluating the market segments

1. Segment size and growth

Does the potential segment have the right size & growth characteristics

2. Segment structural attractiveness

The company has to appraise the impact on long-run profitability of five groups: industry, competitors, potential entrants, substitutes, buyers & suppliers.

  • Threat of intense segment rivalry: a segment is unattractive if it already contains number of strong or aggressive competitors.
  • Threat of new you stop likely to attract new competitors who will bring in new capacity, substantial resources & drive for market share growth.
  • Threat of substitute products: a segment is unattractive if there exists actual or potential substitutes for the product & this place a limit on the potential prices & profits.
  • Threat of growing bargaining power of buyers: a segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers' bargaining power grows when they become more concentrated or organized , when the product represents a significant fraction of the buyers' cost, when the product is undifferentiated, when the buyers are price sensitive.
  • Threat of growing barging power of suppliers: a segment is unattractive if the company's supplier-raw materials, equipments etc.- are able to lower prices or raise the quality or quantity of ordered goods or services.
3. Company's objectives and/or resources

The company needs to consider its own objectives & resources in relation to that segment could be dismissed because they do not mesh with the company's long term objectives. Even if the segment fits the company's objectives, the company must consider whether it possesses the requisite skills & resources to succeed in that segment. Sometimes companies use segments to market towards larger demographics.

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