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Target market

What’s the definition of a target market, and why is it important? What to know about types of target markets, including segmentation, strategy and examples

Effectively defining a target market is an essential step for any business selling a product, service or other commodity. According to McKinsey & Company, highly successful “triple-play” companies — those that beat revenue and earnings expectations while also raising guidance for future quarters — are more than twice as likely to have “clearly defined target groups.” 

But what does it mean to define a target market in today’s digital age? Why is the concept more important than ever, and what strategies can leaders leverage to achieve the best possible results? Let's take a closer look at the definition of target market, as well as types and examples, and a basic guide on how leaders go about building a brand strategy.

Target market definition

What is a target market, exactly? In broad terms, the definition of a target market is a group of people most likely to buy a product or service, or otherwise engage with a sales or marketing message. The process of creating, managing and improving a target market also helps define key messaging and a unique selling proposition (USP), while getting more value and return from sales and marketing efforts. 

Target markets are typically defined as subsets of a larger industry. For instance, the travel industry has an inherent consumer base of those who travel, or intend to. Companies operating in the travel industry must define their target market within those parameters — for instance, targeting business travelers rather than vacationers, or luxury rather than budget travelers. 

The most common types of target markets are based on geographic location, psychographic and behavioral characteristics, and demographic data like age, gender and income. By segmenting buyers in these groups, businesses can more accurately reach the people they want, in the places they’re located — no small task in the digital age — while offering the best possible messaging to convert them. 

What’s the difference between a target market and a target audience? A target market refers to a large group of potential customers with a broad base of shared characteristics. A target audience is a more specific group within that target market, towards whom businesses craft specific, personalized messages — such as an email directly addressed to a specific person at a specific place at a specific time.

Why is it important to define a target market?

Investing in defining and continuously refining a target market is a key tool to ensure that a business connects with the right consumers at the right time. This optimizes sales and marketing efforts by reducing waste — for instance, paying for campaigns directed at unlikely buyers — and can directly impact revenue and present value. 

Defining a target market also helps businesses better understand their customers’ motivation and preferences. This info can be used to create buyer personas, and to drill down into more fully defined target audiences to deliver personalized content. (Research has shown that 90% of consumers find marketing personalization “appealing,” and 80% say they’re more likely to engage with it.) 

In addition to enabling more effective messaging, the information gained from effective target market research can help businesses develop deeper relationships with customers and build brand loyalty. Proactive gathering of target market data can also help businesses more quickly and effectively adapt to changing consumer values and preferences. 

Successfully Identifying and engaging a target market will also help inform other, more operational decisions, relating to everything from packaging and product design to methods of shipping and distribution. Essentially, it can — and should — influence every key decision and guide all activities taken by a company, particularly when it comes to planning for future growth

Types of target market segmentation

Segmentation is a key part of defining a target market. The process of defining a target market by different shared characteristics, segmentation allows companies to focus on certain key aspects — like people over a certain age, for instance, or those who live in a specific geographical region. 

Target market segmentation helps businesses distinguish worthwhile from unlikely prospects and provides for a more informed and effective means of lead qualification. Segmenting also enables better understanding of and communication with existing customers, which in turn helps refine market position and bolster brand identity

There are five main types of target market segmentation strategy
  • Geographic segmentation groups people based on where they live and work. 
  • Demographic segmentation groups people based on personal identifiers like age, gender, education and income. 
  • Behavioral segmentation groups people by behavioral traits, such as buying patterns and preferences. 
  • Psychographic segmentation groups people by personality and social identification, like political affiliation and religious orientation. 
  • Firmographic (B2B) segmentation groups companies, as opposed to people, using strategic data like industry, revenue, number of employees, and so on. 

Usually, best results require exploring a number of segments at once. For instance, Amazon has a target market that includes both consumers of all types, as well as businesses seeking web hosting services. Different target markets can be prioritized — for instance, a geographic area could be a company’s primary target market, while those under a certain age could be secondary.

How to develop a target market strategy

How should businesses go about creating a target market strategy? In other words, how do you go about answering key questions like who are my ideal customers? Where do they live? What are their buying preferences? Where can they be reached? 

A formal target market analysis is critical to not only answer those questions, but also to make sure that the right questions are even being asked. It does so via a five-step process: 

Step 1: Self-analysis. Get a clear picture of your company, what you’re selling and who you’re selling it to. An effective way to do this is with a SWOT analysis — a systematic review of a company's strengths, weaknesses, opportunities, and threats.  

> Pro tip: When conducting a self-analysis, think in terms of characteristics you’re defining, and how the results of the analysis can be leveraged to meet the needs of a specific buyer. What problems are you solving? Are you successfully fulfilling your mission? If not, where is improvement needed — or, how can you adjust your strategy to emphasize your strengths? 

Step 2: Competitive analysis. Define your perceived competitors, and review their performance —who they’re speaking to and how well they’re doing it, as far as you can ascertain. Define their customer base as clearly as possible by reviewing their website and social media efforts, as well as conducting formal market research

> Pro tip: Keep your eyes open for gaps in the market. Is there a segment that the competition is failing to reach? If so, does it make sense for you to target the group?   

Step 3. Define basic segments. Based on your strengths and weaknesses, and that of your competitors, what are the most foundational elements of your target market? What types of customers do you have a record of attracting, in terms of demographics, location or behavior? How about the competition? How do those groups overlap?   

> Pro tip: Look for broad trends here — you want to cast the widest possible net when defining your target market. Breaking these groups down into smaller segments comes next, when defining your target audience(s). 

Step 4. Perform market research. Once you’ve established your most likely segments, further insights can be revealed with the help of professionally conducted market research. By partnering with a research specialist, you can delve deeper into geographic and demographic data for virtually any target market — how they behave, who they associate with, where they can be found and much more. 

> Pro tip: You can acquire a great deal of market research using basic tools like Google Analytics. However, it still takes expertise to decipher that data. A specialist can do so, while also helping you understand regional demand in a way that can help inform location-based marketing strategy and potentially even manufacturing or distribution. 

Step 5. Perform regular reviews, and revise accordingly. When it comes to accurately defining a target market in today’s fragmented marketplace, findings can change dramatically from year to year. What defines the ideal buyer for a given product or service one year could be different than the next. In other words, the work is never done — it’s a cycle of continuous understanding and information gathering. 

> Pro tip:  A target market may have to grow and scale over time, if possible. This can take a number of forms — for instance, a geographic market may be expanded to include other locations, or it could expand to include other types of segments, like age, income or buying patterns.    
  

Target market examples

What’s an example of a successful target market? Here are a few examples of companies that have leveraged target market strategies with remarkable outcomes. 

Target market examples: Coca-Cola

As one of the world’s most recognized brands, with a trademark that’s reported to enjoy a 94% global recognition rate, Coca-Cola’s target market transcends age, gender, socioeconomic categories and even global boundaries. And this range is reflected in a rich diversity of products, including Sprite, Minute Maid and sugar-free Diet Coke — all available in a wide variety of flavors, sizes and packaging. 

Coca-Cola did not always enjoy such market dominance, but fought its way out of the soda shoppe over the course of many decades. And for all its success, the company is also instructive for a number of missteps like the ill-fated launch of New Coke in the 1980s. And, even while dominating the international market, Coke’s success has been less consistent at home, where Pepsi is more competitive.

Target market examples: Nike

Like Coca-Cola, Nike is a global brand with worldwide recognition. Their target market is more defined in terms of age, and has been repeatedly recognized as the “favorite footwear and apparel brand” for teenagers in the U.S. in the past decade. In general, though, Nike’s target market is anyone who aspires to exercise, as expressed in its famous “if you have a body, you are an athlete” mission statement

Perhaps even more impressive, though, is the company’s embrace of the female target market in recent years, resulting in a dramatic 24% growth in revenue. To do so, Nike reinvented offerings like bras and leggings, going so far as the use of specialized technology to create “data visualizations” of the human body to improve product development, as a Nike research director explained to Retail Dive.

Target market examples: Apple

The “most valuable brand in the world, and probably of all time,” with a 2022 market valuation of almost $950 billion, Apple is a stunning success story in the efficacy of successful defining and targeting a specific market — particularly when that target market is largely middle- to upper-income earners in urban areas with the disposable income to pay for high-end technology products. 

For that price point, Apple’s target consumers get a top-notch user experience, a reliable and highly supported product, and considerable brand cache — a tradeoff that appeals to students and professionals between the ages 20 and 45. And within this broader target market, the company has successfully targeted more specific audiences like those who work in graphic design or film production. 

Target market examples: Tesco

In stark opposition to Apple’s high-end approach, Tesco, the British big-box retailer, targets a market that’s interested in bargains and motivated by value and affordability. This is a customer who’s willing to become a club member to get the lowest price possible — a demographic that Tesco has successfully leveraged to become one of the world’s biggest multinational retail chains based on revenue. 

The company has successfully pursued specific segments of its larger target market with campaigns and features like Tesco Bank and the Clubcard Pay+ innovation program, which works online and offline. And with its relaunched Everyday Value brand, Tesco built on considerable brand loyalty while also “shifting the rhetoric away from price to real value,” as Rosie Baker writes at Marketing Week

Target market examples: Primark

Another of the world’s most prominent retailers, Primark pursues a target market that’s fashion minded and budget conscious — or “fast fashion,” as it’s sometimes called, along with brands like ASOS, Gap, Zara and H&M. With little advertising and in defiance of current digital trends, the company built a strong following through word of mouth and the appeal of a satisfying brick-and-mortar experience. 

While known for its low price point, Primark’s story isn’t all about pricing. The company also fosters brand loyalty by offering select customers items on a basis of exclusive and limited availability. And, although it offers all styles of clothing, it also focuses more on women more than men, and on younger more than older shoppers, with a primary range of 16 to 30 years of age.   

Target market examples: ASOS

Another “fast fashion” brand, ASOS targets a market that’s closely similar to Primark — largely in the 18-to 34-year range, and both fashion minded and budget conscious. Yet it takes a different course in reaching that market, employing cutting-edge marketing mix like savvy social media campaigns on TikTok, Instagram and Snapchat, smart email marketing and a stylish and engaging website. 

On a larger scale, ASOS is taking on the global market, with a mission to become a “truly global retailer”. While floundering in 2022, that effort paid dividends as recently as 2021, when the company reported a triple-digit increase in profit — largely the result of a successful diversification during Covid-19.

Target market examples: Starbucks

 Starbucks has successfully defined and engaged its target market in a way other businesses can only dream of. Initially targeting 20- to 40-somethings willing to pay a higher price point for convenience in coffee and food, Starbucks has successfully embraced new target markets like the quick-lunch and mobile-order/app-based customers. 

Based mostly in urban and suburban areas, Starbucks consumers tend to be busy, on-the-go students and professionals. One way it reaches those buyers is with a popular rewards program that rewards quick transactions. And an ambitious plan for international expansion — its store count in China alone is expected to reach 9,000 stores by 2025 — means plenty of geo-based targeting, as well.

We can help with your target market strategy

Defining, understanding and continuously refining your target market is critical for success. But it’s also no small job. Extensive market research is required, along with an ability to understand data in a way that provides the clearest, most accurate answers. 

If you’re seeking help locating, defining or connecting with target groups — even on limited marketing resources — you can trust the experts at GfK. From customer analysis to market intelligence and research, we’re standing by to offer the data, expertise and insights you need to not only find the answers you need, but to make sure you’re asking the right questions to begin with.