Whether market segments and target markets are selected on the basis of intuition, marketing research, or a combination of the two, they are the basis for creating an effective marketing mix for any small business. Segmentation and target market decisions must be made for both onground and online customers.
Market segmentationDividing the market into several portions that are different from each other. It involves recognizing that the market at large is not homogeneous., dividing a market into relatively homogeneous subgroups that behave much the same way in the marketplace, is the necessary precursor to selecting a target market or target markets. The extensive bases on which a company is able to segment a market are presented in Table 6.1 "Market Segmentation". The challenge is knowing which group(s) to select. Many small business owners have a good intuitive sense of the segments that make sense for the business, and they choose to go with that intuition in devising their marketing strategy. However, that intuition may not be precise or current enough to be of the most help in planning a marketing strategy. Marketing research can be of help here, even to the smallest of businesses.
Marketing research can help the small business identify and refine the segments that offer the greatest opportunities. Part of that process will be to identify segments that meet the requirements of measurabilityThe ease with which a segment can be identified and how easily the size of the segment be estimated., substantialityThe segment is large and profitable enough to justify an investment., stabilityWhether consumer preferences are stable over time., accessibilityBeing able to communicate with and reach the segment., actionabilityWhether a small business is capable of designing an effective marketing program that can serve the chosen market segment., and differential responseThe extent to which market segments are easily distinguishable from each other and respond differently to company marketing strategies..Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 175–76. Meeting these requirements will increase the chances for successful segmentation.
Once multiple segments have been identified, it is necessary to select a target market or target markets. If only a single segment has been identified, it becomes the target market.
The selection of a target marketOne or more segments that have been chosen as the focus for business operations. or target markets will be based on the segments that have been identified as having the greatest potential for the business. (In Chapter 6 "Marketing Basics", a target market refers to one or more segments that have been chosen as the focus for business operations.) Only some of the people in the marketplace will be interested in buying and/or using a company’s product or service, and no company has the resources to be all things to all people. Resources are always finite, but this will especially be the case for the small business, so all marketing efforts should be directed as precisely as possible.
Selecting the target market should be guided by several considerations:Susan MaGee, “How to Identify a Target Market and Prepare a Customer Profile,” accessed January 24, 2012, http://edwardlowe.org/erc/?ercID=6378; Adapted from “3 Reasons to Choose a Target Market,” Morningstar Marketing Coach, December 16, 2008, accessed December 1, 2011, www.morningstarmultimedia.com/3-reasons-to-choose-a-target-market.
Choosing the right target market is a critical part of the marketing strategy of a small business. The target market should be the best match for a company’s products and services, thus helping to maximize the efficiency and effectiveness of its marketing efforts.
If a small business wants to go with a niche marketA small, more narrowly defined market that is not being served well or at all by mainstream product or service marketers., the same considerations apply. A niche market is a small, more narrowly defined market that is not being served well or at all by mainstream product or service marketers. The great advantage of pursuing a niche market is that you are likely to be alone there: “other small businesses may not be aware of your particular niche market, and large businesses won’t want to bother with it.”Susan Ward, “Niche Market,” About.com, accessed December 1, 2011, sbinfocanada.about.com/cs/marketing/g/nichemarket.htm. Ideally, a small business marketing to a niche market will be the only one doing so. Niches are very important to small businesses that want to sell pricey chocolates (see, for example, www.cocoadolce.com/about.php). They focus on niches such as weddings, seasonal offerings, and specialty items. They also sell online in order to reach a broader market.