Targeting…who’s first?

by | Aug 12, 2019 | Marketing, Segmentation | 0 comments

Making a choice to go down path A means you choose NOT to go down paths B, C and D.  Choosing a given path means you commit your resources to that path.

Targeting is a strategic decision to committing yourself to a choice and sticking to what your good at (or can get good at fast).

To target (verb) = to make a decision to focus on a segment (or group of segments)
Target (noun) = segment(s) in focus

If you’ve read and remembered my previous blog entry you’re now a segmentation expert.  You have gained a deeper understanding of yourself and your world.
Now on to ‘targeting’ as I promised earlier in August, so many choices, which one to pick?
To whom should I focus my marketing efforts?

The biggest?  The fastest growing?  The richest? The niche market? The best market?  All of the above?

The short answer is:

It depends.

The long answer is: 

You need to target the segments that you are best suited to serve.
It’s quite a strategic question as it will define the personality and the sustainable competitive advantage of your company.  Targeting means you have made and committed to a choice.  This also means that you have to ‘give up’ targeting another segment.  Making one move is never in isolation as it means you are not making an alternative move, call it opportunity cost.  If you’re a chess player then you’ll know the importance of a first move, not unlike the first date with your sweetheart.  You have to decide on a target and commit yourself to that decision.  If you’re not committed to that decision you’ll send unintended messages to the whole market.  You’ll get ‘stuck in the middle’…and could end up going home alone.
In marketing terms, Porter has 3 generic strategies that have become the backbone of every good marketing strategy.  Essentially you need to pair, develop or acquire company resources to match with the unique demands of your chosen segment.

If you’re targeting the biggest segment, you probably:

  • are a large company or have sizeable capital and fixed asset investments (factories, R&D)
  • have generic or ‘standard’ product
  • have one or more ‘cash cows’ – you’ve amortized your fixed costs and only have variable costs so your business is profitable even if your margin is low.
  • make money by selling in large volume
  • have a low cost structure
  • consider R&D mainly for minor upgrades to remain competitive
  • focus on market penetration, channel and direct communications

If you’re targeting the fastest growing segment, you may find the following characteristics:

  • small or medium sized company
  • high R&D investment (many years to amortize)
  • competitive advantage lies in technology or product/service delivery speed
  • not profitable or almost profitable
  • you might be a start-up internet company

The premium segment:

  • you’re providing a premium product
  • relatively small market
  • price is not the primary criteria
  • perceived quality and prestige is important
  • your R&D is high
  • your prices are high
  • your margin is high (or should be)
  • you might be Apple Inc.

The niche segment: Similar to the premium segment

  • you are a small or medium sized company
  • you a have relatively high R&D investment as you need to be perceived as the ‘cutting-edge’ in technology
  • you make one product or focus on one segment
  • buyers seek unique properties and performance characteristics of products
  • performance is the most important criteria
  • you experience pressure to lower prices if there are many competitors
  • you probably make specialised engineering equipment or integrated products

All of the above

  • you’re a large company, perhaps multinational or global
  • you segment by country
  • you have large R&D and production assets
  • you have multiple brands for each of the segments:
  • to differentiate generic, standard and premium product ranges
  • to reinforce product positioning (hint for my next article)

The best market is a trick choice.  The best market is that which is best suited to your business and that will achieve you corporate and marketing KPI’s in terms of share price/earnings, revenue, profitability, market share to mention a few.

So to recap:

  1. Segmentation = understanding
  2. Targeting = deciding
  3. Positioning = …look out for my next post

 

Thanks,

Stephen

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