What Is Target Market Identification?

Definition & Examples of Target Market Identification

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Target market identification is the process of selecting the groups of customers to focus on in a firm's marketing mix.

Learn what it involves, its benefits, and the steps to carry out for the successful identification of your target market.

What Is Target Market Identification?

Target market identification involves selecting one or more market segments or groups of customers to target in your marketing mix. The idea is that tailoring that mix to address the unique needs and desires of your target market can ultimately be more profitable for the firm than mass marketing toward every would-be buyer in the overall market.

Your marketing mix includes the five P's: product (what you're selling), price (how much you're charging), place (where you're selling), promotion (how you're communicating the product's benefits), and people (how you and team can give you a competitive edge).

How Target Market Identification Works

No matter how broadly appealing you think your product or service is, not everyone will need or want to buy it. And gearing your marketing efforts toward the overall market (be it the consumer, industrial, or reseller market) can waste time and money. To maximize your reach and profits, you may want to consider a targeted marketing approach where you identify a smaller target market from the overall market and focus your marketing mix on that market.

Target market identification broadly involves identifying why a customer would want to buy from you, breaking down the overall market into different market segments based on shared characteristics, and then choosing the most feasible, profitable market segment or segments as the target market for your marketing mix.

For example, let's say you run a local luxury men's formal wear shop. Your customer isn't the entire consumer market or even every man. Rather, you might divide the overall market into segments based on geographic, demographic, and psychographic characteristics, focusing on high-income men who are within a 10-mile radius, between the age of 25 and 50, and desire status. You can then focus your marketing mix on that target market to better reach the men who actually need or want your products.

Besides targeted marketing, other strategies include mass marketing (aimed at a wide range of buyers) and product-variety marketing, when a firm deliberately sets out to offer a wide range of products to broaden the customer base. But businesses are slowly transitioning from away from mass marketing to target marketing as the latter often makes for a more effective marketing mix.

Benefits of Target Market Identification

The advantages of identifying a target market include:

  • More effective marketing mix: If you know who your customers are, you can tailor the product, price, and distribution channels to better meet their needs and desires.
  • Helps you choose the right marketing channels: With a target market in mind, you can promote your products or services to customers where they are, be it by posting on a given social media platform or placing ads in a part of town where people in your target market regularly frequent.
  • Uses limited time, money, and resources more efficiently: Promoting to a narrower target market as opposed to the overall market allows you to allocate your hours and dollars more efficiently on the people who are most likely to need or want to buy from you.
  • Maximizes sales and profits: All of the above factors can boost the appeal and reach of your marketing mix, which can boost the volume of sales and improve your bottom line.

How to Carry Out Target Market Identification

Follow these steps for the identification of the target market:

  1. Assess product or service characteristics: Make a list of the features as well as the benefits that come with your product or service. For example, a laundry detergent might feature a color-safe stain-removal formula, with the benefit being cleaner clothes that retain their bright color.
  2. Identify why customers would buy from you: From the features and benefits you listed, identify the key selling point that gives customers a reason to buy your product or service.
  3. Identify the most relevant dimensions of segmentation: Figure out the dimensions along which you want to break down or segment the larger overall market into a smaller target market. To do so, make a list of the major segmentation bases and decide which are relevant to the majority of your potential customers. Major segmentation bases include geographic (customers are targeted locally, statewide, regionally, or nationally), demographic (customers are targeted by their age, gender, race, income, and education level, for example), psychographic (identification based on attitudes, beliefs, emotions, lifestyle, and hobbies), and behavioral (identification based on various patterns such as purchasing occasion and loyalty status).
  4. Segment the market according to specific criteria: Identify one or more specific segments that will define the target market. For example, a men's and women's shoe retailer that chooses to segment the market by the demographic characteristics of gender and the psychographic characteristic of hobbies may decide to target men who enjoy running in their performance running shoe campaign and women who play tennis for their tennis shoe campaign.
  5. Choose the most profitable segments to include in the target market: Evaluate how worthwhile it would be to pursue each identified market segment by evaluating your firm's financial resources and the profitability of each segment, which segments your competitors serve, and how established you are in the market. If you can't afford to promote to all the identified segments (or it wouldn't be lucrative to do so), there's too much competition for a given segment, or you're trying to break into a new market, you may want your target market to focus on one segment.

Key Takeaways

  • Target market identification is the process of selecting the groups of customers to focus on in a firm's marketing mix.
  • It involves finding out why customers would buy from you, dividing the market into segments according to demographics and other characteristics, and then finding the most profitable segments to include in your target market.
  • It affords a more effective marketing mix that maximizes your reach and profits.
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Article Sources

  1. Edward Lowe Foundation. "How to Identify a Target Market and Prepare a Customer Profile." Accessed Oct. 21, 2020.