Defining Target Market & Its Importance to Service Organizations

Defining Target Market

Target markets are defined and profiled with reference to a mix of demographic, geographic, socio-economic, psychographic and behavioral data in service organizations.  Although the emphasis given to any one of these data sets may vary with circumstances, it is important to know how the nature of customers is shaped and influenced by all these considerations

Importance of selecting a target market for service organizations

A target market lies at the heart of any marketing strategy.  This is to say that, from a marketing perspective, all decisions about what to produce or offer, in what form, where, how, and at what price, are governed by the pre-determination of the target market, that is the intended consumer or end-user, at whom this offering is to be aimed.

Target Market Selection

The process of selecting a target market begins with market segmentation, that is the process of analyzing a broad market of consumers of a service product category. Then breaking this aggregation up into segments or groups of buyers who share common characteristics, needs, wants, lifestyle and purchasing behavior.

From these groups or segments a marketer selects one or more target segments at which to aim their service product offering, and then sets about gaining as much knowledge about them as is necessary in order to formulate a service product and delivery strategy that will appeal to them.

Market Segmentation

Market segmentation is the process of analyzing a broad market of consumers of a service product category and then breaking this aggregation up into segments or groups of buyers who share common characteristics, needs, wants, lifestyle and purchasing behavior.

4 ways of Market Segmentation Evaluation Criteria
  1. Measurability
  2. Accessibility
  3. Substantiality
  4. Actionability

From these groups or segments a marketer selects one or more target markets at whom to aim their service product offering. Market segmentation and selective targeting enable service providers, who often are small and medium-sized owner operated businesses, to differentiate themselves competitively, to specialize, and to concentrate their limited resources in the most effective manner. It is simply unrealistic and impractical to attempt to be all things to all people.

Hence, rather than trying to compete in an entire market against all competitors, each firm should adopt a strategy of market segmentation and selective targeting in order to determine which segments of the market it can serve best.

Developing a Service Concept for a Specific Segment

Once a target market segment had been selected and defined, research is needed to identify what attributes of a given service are important to them.  Note that the same individuals may have different priorities for attributes according to:

  • The purpose of using the service
  • Who makes the decision?

It is also important to distinguish between the importance of an attribute versus the determinacies of that attribute (that is the extent to which it determines the choice of one service offering over another).

When competing services are perceived as equally matched on the more important attributes, it is likely that choice will be determined by perceived differences in less important attributes, including those associated with supplementary services rather than the core service product alone.

Therefore, a marketer’s task is to identify which attributes are determinant as well as important.  In this way a service product concept and strategy are formulated in such a way that not only appeals to but attracts the interest and patronage of the intended target market.

Leave a Reply