5.3: Selecting Target Markets and Target-Market Strategies

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Learning Objectives

Describe the factors that make some markets more attractive targets than others.
Describe the different market-segmenting strategies companies pursue and why.
Outline the market-segmentation strategies used in global markets.

Selecting Target Markets

After you segment buyers and develop a measure of consumer insight about them, you can begin to see those that have more potential. Now you are hunting with a rifle instead of a shotgun. The question is, do you want to spend all day hunting squirrels or ten-point bucks? An attractive market has the following characteristics:

It is sizeable (large) enough to be profitable given your operating cost. Only a tiny fraction of the consumers in China can afford to buy cars. However, because the country’s population is so large (nearly 1.5 billion people), more cars are sold in China than in Europe (and in the United States, depending on the month). Three billion people in the world own cell phones. But that still leaves three billion who don’t (Corbett, 2008).
It is growing. The middle class of India is growing rapidly, making it a very attractive market for consumer products companies. People under thirty make up the majority of the Indian population, fueling the demand for “Bollywood” (Indian-made) films.
It is not already swamped by competitors, or you have found a way to stand out in a crowd. IBM used to make PCs. However, after the marketplace became crowded with competitors, IBM sold the product line to a Chinese company called Lenovo.
Either it is accessible or you can find a way to reach it. Accessibility, or the lack of it, could include geographic accessibility, political and legal barriers, technological barriers, or social barriers. For example, to overcome geographic barriers, the consumer products company Unilever hires women in third-world countries to distribute the company’s products to rural consumers who lack access to stores.
The company has the resources to compete in it. You might have a great idea to compete in the wind-power market. However, it is a business that is capital intensive. What this means is that you will either need a lot of money or must be able to raise it. You might also have to compete with the likes of T. Boone Pickens, an oil tycoon who is attempting to develop and profit from the wind-power market. Does your organization have the resources to do this?
It “fits in” with your firm’s mission and objectives. Consider TerraCycle, which has made its mark by selling organic products in recycled packages. Fertilizer made from worm excrement and sold in discarded plastic beverage bottles is just one of its products. It wouldn’t be a good idea for TerraCycle to open up a polluting, coal-fired power plant, no matter how profitable the market for the service might be.

Video Clip

Yogurt, Anyone? I Mean, Any Woman?

(click to see video)

Are women an attractive target market for yogurt sellers? The maker of this humorous YouTube video thinks so. (She seems to imply they are the only market.)