Entrepreneur's Handbook
TARGET MARKET SELECTION
As a result of the market segmentation activity carried out in accordance with these four basic criteria, market segments with various similar features will emerge. From this point on, the entrepreneur has to decide how many of these market segments will be targeted. Accordingly, the target market refers to a common need that the firm plans to serve or the consumer segment with similar characteristics. Therefore, the entrepreneur should prepare the marketing mix elements according to the characteristics of this target market by selecting one or more market segments after the segmentation activity.
At this point, the entrepreneur has several alternative strategies. These alternative strategies can be seen in Figure 8.4 (Kotler & Keller, 2012). The entrepreneur can define his target market broadly as in undifferentiated marketing or narrowly as in micro marketing strategy, according to his sources and objectives.
Undifferentiated marketing is a targeting strategy for no differentiation in the target market. In this strategy, the differences between market segments are neglected and all consumers are tried to be reached with the same marketing mix elements. It is useful if the business produces products for the common needs of consumers. However, with the economic and social development of the markets, it can be said that this strategy is not very effective especially for small businesses.
In the differentiated marketing strategy, the company selects a few of the market segments it creates and develops a marketing mix that suits the expectations of these segments. It is the most used strategy for reasons such as increasing consumer satisfaction and creating competitive advantage. In this strategy, the company aims to create differences in marketing mix elements such as product, price, distribution and promotion in accordance with the expectations of the selected market segments. For example, while the Vestel brand targets middle-income white goods users, Regal, the other brand of the same company, targets customers in the lower income group. Thus, the company will meet the expectations of those who want good quality products on the one hand, and those who want low prices on the other.
The subject of differentiation is a very important issue in terms of marketing and innovation. By using this strategy, the business can increase its profits by meeting the different consumer needs while also introducing innovations in the changing competitive environment. Therefore, it should be emphasized on what kind of differences can be made using this strategy. For example, differences in product, pricing, services, customer relations, and brand image may bring competitive advantage to the business.
Concentrated marketing is similar to differentiated marketing, but with the targeted market segment, the business goes to operate in a more narrowed market. In other words, although more than one option is offered to more than one market segment in the differentiated market, in concentrated marketing, this is reduced to a single market segment. Because the target market is defined smaller, consumers in this group have more homogeneous expectations. Therefore, it can be stated that customer satisfaction will be higher in this strategy.
Small businesses with limited resources often follow this concentrated (niche) marketing strategy. In this type of segmentation, since the market boundaries are drawn very clearly and activities are carried out accordingly, it is possible for the business to gain a very strong position. For example, a store that only sells toys will be more advantageous than a retailer that sells toys besides many products in that region, and may be the first address of consumers who want to buy toys.
Micro Marketing refers to the targeting of the most narrowly defined market segments. Here, the company designs its products and marketing programs to suit the needs of a particular person or region. In this strategy, also called tailor work marketing, the company produces customized products for each customer, just like the tailor who makes special production for each customer. The production of a birthday cake with a picture of the person can be an example. With the development of production technologies, this strategy is used more and more. For example, even luxury vehicle manufacturers can receive customers' requests through the online system and produce according to their desired color and interior design features. In this strategy, which can maximize customer satisfaction, it can be profitable for the business as long as the market size is sufficient.