What is Market Segmentation and Target Market?

We have defined Market as an institution or a mechanism allowing buyers and sellers to make exchanges. It has a Place concept which refers to a convenient meeting place for buyers and sellers for making exchanges. It emerges into an Area where two or more individuals have unmet needs, have products for exchange and there is a mode of communication. For example, business via internet, stock market where face to face meet is not necessary. Market is also interpreted under Demand Concept which refers to the total demand. The buyers are willing to pay for the product to satisfy their need.

We all know that the wants and demands of consumers are never the same. Each person will react differently to price, advertising, product features. Organizations cannot make all kind of products that meet wants and needs of all the consumers in the market. It will be very difficult to serve them effectively and efficiently amidst competition.

Organizations try to meet the needs of specific group of people by dividing a market based on different categories (age, sex, etc.) and aligning it with the organizations mission. Market segmentation involves dividing or grouping buyers with similar needs within a market. Instead of competing in the entire market, organizations identify a segment that it can serve effectively which is known as a Target Market.Target market refers to a group within a market which an organization chooses to tab for achieving its objectives.

Market Segmentation helps organizations to implement its skills and capabilities effectively in making a competitive offering (product or service), and the customers get an offering of their choice to satisfy needs and wants.

Market Segmentation can be defined as –
• Market Segmentation refers to dividing a market into groups or sub-markets of buyers who have similar needs, wants, and buying characteristics to help develop target market strategy.

• Market Segmentation is the sub-dividing of a market into homogenous sub-sects of customers where any sub-sect may conceivably be selected as a market target to be reached with a distinct marketing mix – Prof. Philip Kotler

• Another accepted definition – Division of a market into groups with similar purchasing characteristics.

Marketers basically try to achieve maximum market share by serving people with similar needs, wants with similar response to marketing strategy. They focus on each segment with appropriate marketing mix by offering an appropriate product in that segment. Each segment is distinct from the other.
For a certain product, certain kinds of people are most likely to show interest and buy the product. Marketers study and group these prospect buyers. For this the marketers rely on the behaviour of buyers for similar kind of product in the past or Market Opportunity Analysis.

The basic idea is not to serve the entire market but identify a segment that the organisation can best cater to. The marketers identify certain criteria to group customers together. There is not a single way of segmenting the market so the marketers study different variables. An individual in a segment will mostly exhibit the same behaviour as compared to any other individual or individuals in the same segment.
There are common ways of segmenting a market. These are referred to as “Bases of Market Segmentation”- behavioural, demographic, geographic, or psychographic.

A company can have several target market options. The challenge faced by marketers is to select a target market that offers the most lucrative opportunities for the organisation. Selecting target markets involves strategic decisions that go beyond Market Opportunity Analysis. These decisions guide marketing objectives and marketing program (mix) decisions. The factors considered are-

• Company’s strengths to fulfill requirements of groups identified
• Competitor analysis
• Costs of reaching target markets

Therefore, we can say that Market Segmentation involves two basic steps-
1) Identifying the most attractive segment or group of buyers, and
2) Creating and implementing marketing programs for the segments selected (Target markets) to achieve organisations objectives.

Organisations can have one or more target markets within a market. Each target market is offered a different marketing program. This strategy is referred to as Multiple Segmentation Strategy.