A target market is simply a specified group of potential consumers who are likely to have a need for (or interest in) a given product or service. As a business, targeting is the process of filtering a population for the characteristics that most closely align with their customer base. It's easy to see why this is a valuable tactic for businesses. Through identifying who the ideal consumers are, acquiring these consumers and gathering data about their current needs is that much easier and cheaper.
Target Markets
This is a simple image of three circles, each one smaller within the next. The idea is that a target market is a specific segment of a broader population, filtered through strategically collecting information.
An Example
Let's take a simple example. You work at a university, in their marketing department. They pose a simple question: who should we advertise our services to to get the most applications at the lowest cost? Your first instinct is to young men and women who have (or likely will) complete a high school diploma, and who live in relatively close proximity to the university.
However, your marketing manager informs you that this target market may not be the perfect match for the majority of your marketing spend. As you start researching the question, you realize a great deal of the paying customers of universities are actually the parents of students and not the students themselves. Interestingly, marketing to the parents may be more valuable (or maybe not!). You bring this conclusion back to your marketing manager, who goes a step further and asks about school guidance counselors.
As you can see from this example, choosing a target market isn't always quite as simple as it seems. Sure – it may be true that advertising to 16-18 year old students currently enrolled in high school performs best in some ways. But it may be true also that promoting to guidance counselors and high school teachers ultimately reaches more students, and for cheaper on a per student basis.
Common Targeting Approaches
Target markets can be specified using virtually any metric or approach. However, all marketers should be familiar with the basic market segmentation approaches that are most common across industries:
- Geographic – For many businesses, the location and region (and potentially the climate) are hugely relevant data points, creating the first large filter on targeting.
- Demographic/socioeconomic – This filter focuses mostly on gender, age, career, education level, marital status, wages and other biographical information.
- Psychographic – Compared to the previous two, this is a bit more complex. Psychographic targeting revolves around attitudes, religion, lifestyle, and values. Picture certain news channels, which seem to cater to certain types of opinions.
- Behavioral – This usually refers to their purchasing behaviors, relative either to your business, industry, or complementary industries. An example of this would be a headphones company targeting users who purchase DJ equipment.
- Product-related – Some user groups build up relationships with the products themselves. Smartphone users, for example, will find themselves bombarded with targeting specifically for the particular operating system.
The ultimate objective of most effective targeting approaches will be to filter the broader population into a small, idealized segment that is highly likely to convert into paying customers.