What is a target market? 6 steps to defining a target market

Identifying a target market is an important step in any business strategy. In this article, 1C Vietnam will help businesses explore the concept of target markets and go through 6 essential steps to effectively select a target market.

1. What is the target market?

A target market is a group of consumers who share common demographic and behavioral characteristics and are identified by a business as potential customers for its products or services. The business focuses its marketing and communication resources on this group. In other words, a target market helps a business develop an appropriate marketing strategy.

Target market and target audience are two related terms, but carry different meanings in the marketing context.

• A target market refers to a specific group of customers that a business wants to reach to sell its products and services, and is the focus of its marketing strategies.
• Meanwhile, target audience is a narrower concept, referring to the group of customers that specific advertising campaigns are aimed at.

An example of a target market would be: a children's toy might target boys aged 9-11 and their parents as the target audience - the group that makes the purchase and is the target of the advertisement.

2. Why do businesses need to identify target markets?

Applying methods to identify target markets helps businesses manage current customers and increase potential customers effectively. By understanding the target market, businesses can compete better as well as increase the ability to satisfy customers.

• Understand customer needs and wants: Identifying your target market helps businesses better understand the needs and wants of their customers. This not only increases customer satisfaction but also increases the likelihood of a purchase.
• Increase marketing effectiveness: By knowing your target market, you can focus your resources on marketing campaigns that target specific customer groups. This saves costs and increases the effectiveness of your marketing activities.
• Improve competitiveness: Identifying the target market helps businesses increase their competitiveness in the market. From there, businesses can provide unique products and services that best meet the needs of customers.
• Product and service development: Identifying the target market is the basis for businesses to develop new products and services. When accurately understanding the needs and desires of customers, businesses can make appropriate improvements to develop products and services.
• Increase sales: Understanding customers' needs and desires helps businesses develop effective sales and marketing strategies, thereby increasing sales and profits.
• Improve customer relations: By understanding your customers, businesses can provide better customer support and care services. This not only helps increase customer satisfaction but also builds loyalty and creates long-term relationships.
• Defining business strategy: Target market is the basis for businesses to define business strategy. Businesses can determine appropriate goals and development directions based on the results of target market analysis.
• Minimize business risks: By understanding the characteristics of target customers, businesses can make accurate business decisions, minimize risks and increase the likelihood of project success.

3. Common criteria for identifying target markets

Categorizing and understanding these criteria not only helps businesses identify the right target market but also helps them create appropriate marketing and product strategies, thereby increasing business efficiency as well as customer satisfaction.

4. 6 steps to build an effective target market for your business

A clearly defined target market not only helps businesses focus their resources and marketing efforts, but also improves business efficiency, optimizes profits, and enhances competitiveness. Below are 6 basic steps to help businesses identify and build target markets effectively.

4.1 Target market analysis

To effectively identify a target market, businesses need to do some research, collect statistics and market data to understand potential customers, their needs, and thereby make better marketing decisions.

• Gather information: Collect market data through sources such as industry reports, market research, customer surveys, and competitor analysis.
• Trend Analysis: Examine consumer trends, technology trends, and economic factors to identify opportunities and challenges in the market.

4.2 Market segmentation

This is a research step that aims to segment customers based on characteristics such as income, age, gender, and personality traits. This method helps to identify the target market by creating subsets or small groups within the market, thereby helping to better understand the target audience.

• Identify segmentation criteria: Use criteria such as geographic, demographic, psychographic, and behavioral to divide the market into smaller, more specific segments.
• Assess the potential of each segment: Assess the size, growth, accessibility and competitiveness of each segment to select the most potential segments.

4.3 Identify potential target markets

Modern technology has made it easier than ever to determine the demographic and psychographic characteristics of users.

• Using social platforms: Most social networks offer free demographic analytics, which helps businesses better understand their followers and engage with their ads in an additional analytics area.
• Leverage email addresses: If your business has a customer email list, email management tools can provide insights into the demographics and important characteristics of your target audience.
• Sales data mining: Analyze data from payment processors or a business's advertising history. This includes looking at purchasing trends, average costs, peak purchasing times, and fluctuations in shopping behavior.
• Customer surveys: Businesses can collect information directly from existing customers via email, phone, or in-person surveys to better understand their needs and wants.
• Research existing market research: Look for studies and reports from other experts to learn more about your business goals and current market trends.

4.4 Building a market access strategy

To implement an effective marketing strategy to reach the target market, the following important factors need to be carefully considered:

• Market size: Determine total revenue, total sales volume and market demand to understand potential size.
• Growth Rate: Measures annual growth rate to compare current growth with previous years.
• Competitive Ratio: Assesses the level of competition and presence of competitors in the same market segment.
• Customers: Consider the size, number and affordability of customers in the target market.

In addition, to identify and promote competitive advantages, businesses need to consider:

• Product/service quality: Assess the standards and differences of the product or service compared to competitors.
• Customer Service: Test the quality and effectiveness of customer support services.
• Brand reputation: Analyze brand credibility and recognition in the market.
• Promotions: Review current promotions and offers.
• Product packaging: Consider the design and quality of the product packaging.
• Payment Methods: Evaluate payment options and customer convenience.
• Distribution channels: Analyze the coverage and effectiveness of distribution channels, branches, and transaction points.
• Staff: Evaluate the competence and professionalism of the staff.

4.5 Market testing

Deploying advertising can help businesses quickly achieve profits and collect valuable data for analysis. By tracking user responses through metrics such as ad click-through rates or purchase volume, businesses can assess the suitability of their target market. This process helps find the most optimal factors to increase conversion rates.

4.6 Evaluate the effectiveness of the target market

After implementing strategies, re-evaluating the target market is an important step to determine whether the chosen target market is truly suitable and delivering the desired results. Businesses can use some of the following evaluation methods:

• Compare to KPIs: Evaluate previously established key performance indicators (KPIs) to determine how well goals are being achieved. KPIs may include revenue, profit, market share, and growth rate.
• Revenue and Profit Analysis: Review revenue and profit from target markets to evaluate financial performance. Compare actual results with original forecasts and plans.

Based on the assessment results, adjust target audience, marketing strategies, products, or distribution channels to optimize effectiveness.

5. Target market selection strategies

To achieve success in attracting customers and maximizing marketing effectiveness, businesses need to understand the strategies for selecting target markets. Below, 1C Vietnam will explore the main strategies to help businesses identify and reach the right customers:

5.1 Full coverage strategy

Full market coverage strategy, also known as comprehensive coverage strategy, is when a business combines all small market segments into a larger segment, aiming to serve customers in a uniform way. The business will provide products that meet the common needs of all customers in this market.

5.2 Product specialization strategy

Product specialization strategy focuses on providing a single product or service to all market segments. This strategy is appropriate for products that can meet the needs of many different target markets.

5.3 Market specialization strategy

A market segment specialization strategy focuses on serving a specific market segment by offering a variety of products or services that meet the needs of that segment. This strategy is ideal for businesses that are able to meet a variety of needs within the same market segment.

5.4 Specialize in selection according to the strengths of the business

Accurately identifying target markets helps businesses focus resources more effectively, improve competitiveness and achieve business goals effectively.

5.5 Choose a market with less competition

After segmenting the market, businesses need to choose the appropriate market segment to penetrate. One of the strategies for selecting a target market is to choose the least competitive segment.

6. Successful case studies with target market strategy

To better understand how businesses effectively apply target market strategies, let's explore the successful case studies below with 1C Vietnam:

• Starbucks is a brand known for its premium coffee, targeting middle and upper class customers, usually professionals, business owners or high-income individuals aged 22-50. Starbucks' target audience includes both men and women, especially urban customers who are health conscious and love convenience.
• Nike provides superior quality sports apparel, shoes and equipment aimed at athletes and sports enthusiasts. Nike products are priced at a premium, making them affordable to consumers with high disposable incomes who seek durability in sports equipment.
• Sephora, a cosmetics and skin care retailer, attracts mature female customers by offering free samples and a rewards program. This strategy is especially effective with women in their 30s who are willing to pay for high-end beauty products.

7. Capture your target market with support from 1C:ERP solution

To optimize resources and develop effective strategies to capture target markets, businesses can refer to 1C Vietnam's comprehensive and flexible resource management solution 1C:ERP. The system is an ideal choice, specially designed for global businesses and has the ability to be integrated immediately into existing operating models.

With the combination of advanced technology and implementation experience from hundreds of partners in many countries, 1C:ERP not only supports comprehensive resource management but also allows businesses to deploy quickly, making it the perfect choice to improve management efficiency and increase market dominance.

Re-evaluating the target market after implementing the strategy is an essential step in the business process. By continuously monitoring and analyzing and effectively managing resources, businesses can optimize their operations, ensuring that the chosen target market is always suitable and brings the highest efficiency. If you are in need of consulting the 1C:ERP solution, please contact 1C Vietnam for dedicated support.