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Unlock This CourseImagine trying to sell ice cream to everyone in the world. That would be impossible! Smart businesses don't try to sell to everyone - they focus on specific groups of people who are most likely to buy their products. These specific groups are called target markets.
Key Definitions:
When Spotify launched, they didn't try to appeal to everyone. They initially targeted young, tech-savvy music lovers who were comfortable with digital platforms. By understanding this specific audience's needs (easy access to music without piracy), they created a service that perfectly matched what these customers wanted. This focused approach helped them grow to over 400 million users worldwide before expanding to broader markets.
Market segmentation is like sorting sweets into different jars. Each jar contains similar sweets grouped together. In marketing, we sort customers into groups based on shared characteristics. This helps businesses understand their customers better and create products and marketing that really speak to them.
Grouping people based on who they are:
Example: Saga Holidays targets people over 50 with travel packages designed for older adults.
Grouping people based on where they live:
Example: Umbro sells more waterproof sportswear in rainy regions and lightweight gear in hotter areas.
Grouping people based on how they think:
Example: Lush targets environmentally conscious consumers with natural, ethical products and minimal packaging.
Grouping people based on how they act:
Example: Tesco Clubcard targets different offers to occasional shoppers versus regular customers based on their shopping data.
Not all market segments are worth pursuing. Smart businesses evaluate potential target markets using these criteria:
Is the segment large enough to be profitable? Is it growing?
Example: The vegan food market in the UK grew from £582m in 2014 to over £1bn in 2020 - making it an attractive target market.
Does the segment have the money to buy your product?
Example: Premium brands like Apple target consumers with higher disposable income who can afford their products.
Can you reach this segment effectively through marketing?
Example: Gaming companies can easily reach gamers through platforms like Twitch and Discord.
Can you create a unique offering for this segment?
Example: Brewdog differentiates by targeting craft beer enthusiasts with unique flavours and rebellious branding.
How many competitors are already targeting this segment?
Example: Monzo targeted younger banking customers when traditional banks weren't meeting their needs.
Can you measure the size and characteristics of the segment?
Example: Social media platforms provide detailed analytics about user demographics and interests.
Once you've identified potential target markets, you need to understand them deeply. Market research helps businesses gather information about their target customers' needs, preferences and behaviours.
Information collected directly from potential customers:
Example: Innocent Smoothies tested their products at music festivals before launching, asking customers if they should quit their jobs to make smoothies full-time.
Using existing information from other sources:
Example: A new coffee shop might use ONS data to find areas with high numbers of young professionals who typically consume more coffee.
ASOS has become one of the UK's biggest online fashion retailers by clearly identifying and understanding their target market: fashion-conscious 20-somethings. They've succeeded by:
By focusing on this specific target market rather than trying to appeal to everyone, ASOS has built a brand that perfectly meets the needs of their chosen customers.
Once you've segmented the market and researched your potential customers, you need to decide which targeting strategy to use:
Targeting the entire market with one offering.
Example: Coca-Cola's original drink targets almost everyone with a universal appeal.
Targeting several segments with different offerings for each.
Example: Nike creates different shoes for runners, footballers, basketball players, etc.
Focusing on just one or a few segments.
Example: Saga focuses exclusively on the over-50s market.
When businesses correctly identify and understand their target markets, they can:
Remember: It's better to be loved by a specific group than liked by everyone. The most successful businesses don't try to appeal to everyone - they deeply understand their target customers and create offerings that perfectly meet their needs.