Market Segmentation

Identifying the Target Market

It is not always possible or beneficial to target all customers, especially if an enterprise is small. Therefore, enterprises often choose to aim their goods or services at a specific market. An important question to ask is: how will they reach that market?

Market Segmentation

Market segmentation is the process of dividing the market into groups of customers with similar characteristics. For example, a market segment for sportswear might be girls aged 12–16 with an interest in athletics. This allows an enterprise to tailor (match) its products and communications to this specific segment of the market. Types of market segmentation include:

• demographic – based on age or cultural background
• geographic – based on the country, region or local area where you live
• psychographic – based on personality and attitude
• behavioural – based on interests or needs.

Appealing to the target market

Identifying the characteristics of the target market for the product will help inform marketing decisions within an enterprise. This will include:

• where to sell the product
• what price customers are willing and able to pay
• how best to attract the interest of the target market through promotional techniques.

Reaching the target market

Once the enterprise has identified its target market, it can decide the best way to reach that market. This will include where to sell the goods and services – for example, the type of store, its location and whether online options are available.

• If the target market is an older demographic, then goods and services may be offered in local shops.
• If the target market is high-paid city workers, then goods and services may be located at busy railway stations around London or other large cities.

Try adding some more options to this list. If your class was the target market of an enterprise, where would be a good place for it to locate its goods or services?

Physical and virtual market places

A key consideration is whether to sell in a physical or virtual market place.

• A physical market place is one where the buyers and sellers come together to trade face to face – for example at food stalls, in shops and at trade fairs.
• A virtual market place is one that makes use of the internet. Many enterprises now use ecommerce, either for part or all of their trading. This is often cheaper to set up and allows greater convenience to the customer, who can access the store at any time and from the comfort of their own home, their office or on a mobile device.

Mixing platforms

Enterprises can use a combination of both physical and online stores to reach their target market. Small enterprises are also able to reach their target market through third-party websites such as Notonthehighstreet, eBay, Amazon and Etsy. These have the advantage of being well-established platforms known by consumers. However, an enterprise must take into account that these platforms take a percentage of all sales revenue.