The definition of market segmentation is to divide consumers of diverse or heterogeneous nature into groups with the same characteristics (homogeneous).
While the understanding of the target market is to choose which consumer groups will be served. So, it needs to be understood that market segmentation and target markets are two different things. The target market is carried out after market segmentation.
Companies must assess very carefully through various considerations and segments so that they can determine what the size of the failure segment in achieving sales volumes and profits as desired. Do not let the target market is too broad because it will cause high costs that exceed sales and profit increases.
Also learn: Insurance Concepts (Basic Rules of Insurance Coverage)
Factors affecting the target market
To determine the target market, there are factors that need to be considered. Factors that influence the determination of market segmentation to be targeted by companies as a target market, include:
1. Segment size
Large companies will choose market segments with large sizes and large sales volumes as well. Whereas small companies generally choose smaller market segments with relatively small sales volume. This is done so that companies can adjust their target markets to their respective abilities.
2. Segment growth
Available market segments may be paid. That is, the current market segment is considered small, the possibility in the future can grow into a larger and potential market segment. Therefore, companies need to consider small potential market segments and can generate profits for the company.
3. Competition position
Companies must be able to choose potential market segments that can benefit the company and have a small number of competitors. With a relatively small number of competitors, this condition tends to benefit the company’s position in making a profit.
4. Costs to reach segments
Costs to reach the targeted market segment must also be considered. It is recommended that market segments that are not suitable for marketing activities should not be selected, so that marketing costs incurred by the company are not in vain.
5. Compliance with the company’s capabilities
Market segments that have been chosen and determined by marketers should be carried out seriously. This means that companies should not try other market segments that have not been planned and that have not been chosen by marketers. This will reduce the risk of loss due to incorrect selection of market segments.
The process of implementing the target market is carried out by the company, with the following sequence:
- Develop marketing references for each target target market segment
- Select the target market segment or target market
- Develop product positions for each target market segment
- Develop a profile of the generated psar segment
- Develop the size or attractiveness criteria of existing market segments
- Identify the basis for segmenting the market
Target Market Strategy
Before understanding what a target market strategy is, we need to know what the target market is. According to Kenneth R. Andrew, translated by Bukhori Alma in the book ” Marketing Management and Marketing Services” the definition of target market strategy is the pattern of decisions within the company to determine and express goals, intentions and objectives that produce key policies, and planning to achieve goals at once in detailing the range of business that the company will pursue.
In order to implement the target market strategy, there are three alternative target market strategies that can be applied by the company. The company’s target market strategy choices include:
1. Differentiated Marketing
Differentiated marketing is an attempt by a company to identify certain groups of buyers by dividing the market into two or more groups.
For this, companies must make different products for each of the existing market segments. The aim is to increase the number of sales of goods and services, and to get a strong position in each market segment.
2. Undifferentiated Marketing
Undifferentiated marketing is a company business carried out by reviewing the market as a whole and focusing on the packaging of goods in order to meet the desires and needs of consumers.
The use of a target market strategy with undifferentiated marketing is based on cost savings, both in the field of marketing and company costs in general.
3. Concentrated Marketing
Concentrated marketing is a corporate effort that is done to focus the marketing of its products on one or several groups of buyers who are considered potential.
The goal of a concentrated marketing target market strategy is to be able to focus marketing on the market segments it serves. That way, companies can obtain savings in marketing operations, because of the specialization in terms of products, prices, promotions, and distribution.
Selection of Target Market Strategies
Every company would want to win competition in the business it runs. For this reason, the company must have its own strategy in selecting target markets. In determining the target market strategy, there are several factors that limit the determination of the target market strategy. Factors that limit the selection of target market strategies, namely:
1. Resources – owned by the company
Resources – owned by the company will be one important determining factor in determining the strategy chosen. If a company has limited resources to serve the market, the best strategy that can be chosen and implemented is the concentrated marketing strategy .
2. Product homogeneity
If the company produces products that are homogeneous or with product homogeneity, then the target market can be chosen by using an undifferentiated marketing strategy .
3. Market homogeneity
Market homogeneity is a condition when a number of buyers have the same tastes, the number of purchases of products in each period is almost the same, and the reaction to the marketing of products is also the same. If what is faced is market homogeneity like this, then the most appropriate target market strategy is a differentiated marketing strategy .
4. Product life cycle stages
If the product to be marketed is new goods and there is only one or a few kinds, then the most appropriate target market strategy is to use an undifferentiated marketing strategy with the goal of meeting primary demand.