How do marketers evaluate market segments and choose the best ones to serve?

9.2 Targeting

DEFINED: Targeting (also referred to as market targeting) is the process of evaluating and selecting the most viable nmarket segment to enter.

Once the segmentation possibilities have been identified, the next step is to determine which customer groups to serve. Businesses often select more than one customer group based on criteria such as the following:

·Ability to meet requirements of the customers

·Overall cost to meet customer requirements

·Potential profitability of serving different customer groups

There are several specific targeting choices available, but there are essentially three market coverage choices when targeting: undifferentiated, differentiated, and niche marketing.

1. Undifferentiated Marketing

Building on the concept of mass marketing introduced at the beginning of this chapter,undifferentiated marketing is when a company treats the market as a whole,focusing on what is similar among the needs of customers,rather than on what is different. By using this strategy, companies create products or services to appeal to the greatest number of potential buyers. The benefit of an undifferentiated strategy is that it can be cost-effective because a limited portfolio results in reduced production, advertising, research, inventory, and shipping costs. This strategy is typically most successful when used in a market with limited or no competition or when the product or service has wide appeal and the market is rapidly growing. A wide range of organizations could be classified as having practiced undifferentiated marketing at some point in their history; examples include local libraries, public utilities, Coca-Cola, and Disney.

2. Differentiated Marketing

A firm practicing a differentiated strategy separates and targets different market segments,with a unique product or service tailored to each segment.The result is a distinctive marketing plan for each segment.With a differentiated marketing strategy, companies can generally increase total sales because of broader appeal through greater relevance across market segments and a stronger position within each segment. Sometimes referred to as multi-segment marketing, the strategy not only increases sales potential, but it also increases costs associated with targeting different market segments with relevant messages. Still, if done effectively, there is the potential for greater loyalty, resulting in repeat purchases.

3. Niche Marketing

The third market coverage strategy is known as the niche strategy. Also referred to as concentrated marketing, or focused

marketing, niche marketing is serving a small but well-defined

consumer segment. It is best suited for companies with limited

resources, or companies with exclusive products. This approach allows companies to gain a strong position within their segments because they have a better understanding of consumer needs in those specific segments.The marketing plans for niche markets can be quite specialized.