Key Takeaways
- Market segmentation divides a larger market into smaller groups of customers with similar needs or characteristics.
- The target market is the specific group of customers to whom a company wants to sell its products or services.
- Market segmentation is a precursor to target market selection.
What is Market Segmentation?
Market segmentation is the process or activity of dividing the entire market into subgroups for a convenient approach. These submarkets are divided based on their foundation of specific criteria. In this strategy, a heterogenous market that has distinctively alike submarkets is chosen.
The concept of segmentation was first introduced by Smith in 1957. Even if the market looks different and diversified, there are some characteristics that the submarkets of this market have in common. These submarkets consist of customers with similar features and interests.
All the customers do not have similar needs. Identification of customers is one of the fundamentals of this strategy. Providing a small submarket with similar characteristics is much simpler than catering the products to a vast diversified market.
After creating these submarkets, a common product is launched that will fulfill the needs of this particular niche. Several characteristics like income, personality traits, age, etc., are taken into consideration while creating these submarkets.
The entire market is tapped more conveniently. The efforts and inventory of a firm are concentrated effectively and economically. Advertising the products and thereby selling them to these submarkets is done optimally.
What is Target Market?
The market that is chosen from the segmentation process conducted before, which is targeted for product supply, is known as the target market. The objectives are taken into account, while segmentation is also held accountable while targeting a certain submarket.
The managers target the more profitable segment or the one where there are lesser competitors. Some companies follow the scattergun approach, also known as undifferentiated marketing, while others follow concentrated or differentiated marketing.
Concentrated marketing is also known as niche marketing. As the word suggests, the company focuses on one submarket at once. Focusing on more than one submarket is known as differentiated marketing or multi-segmented marketing.
The companyโs resources, features, and benefits of the products and the characteristic feature of the segment where they are supposed to be supplied are considered and examined.
There are several targeting strategies, like standardization, differentiation, and focus. Focus is a combination of standardization and differentiation. The attractiveness of the submarket forms the foundation of the targeting strategy.
In this strategy, choosing the right segment is extremely important. It is the stage that is implemented after segmentation. Selecting a particular segment to target is the brief activity in this strategy.
Difference Between Market Segmentation and Target Market
- In market segmentation, the entire market is focused, on the other hand, in a target market, a submarket is focused.
- In market segmentation, an entire market is divided, on the other hand, in a target market, a submarket is targeted.
- Market segmentation is the step before a target market, on the other hand, a target market is a process that is done after market segmentation.
- Market segmentation is comparatively a bigger process, on the other hand, the target market is a relatively intricate process.
- The criteria of market segmentation are personality traits, interest in products, need etc., while in target marketing, the attractiveness of the submarket is considered first.
Comparison Between Market Segmentation and Target Market
| Parameters Of Comparison | Market Segmentation | Target Market |
|---|---|---|
| Meaning | Dividing an entire market based on the customersโ needs, and interests, into submarkets, is known as market segmentation. | Targeting submarkets based on their attractiveness or similarity is known as a target market. |
| Priority | First | Second |
| Criteria | Interests, needs, age etc. | Mutual characteristics of a segment |
| Fundamentals | Knowing your consumers | Knowing your submarket |
| Aim | To divide a diverse market | To target key features of a submarket |
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
