Patterns of Target Market Selection
After evaluating the segments on the basis of segment potential, competitor’s position and potential goal and objective achievement, the firm can select the segment that will be the target market(s). The firm can consider five patterns of target market selection. They are as follows:
1. Single segment concentration: In the simplest case, the firm selects a single segment. It is also called as concentrated marketing (see following figure)
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| Single Segment Concentration |
Through single segment concentration strategy, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s needs and the special reputation it gains. Furthermore, the firm enjoys operating economies through specializing its production, distribution and promotion. As it captures leadership in the segment, the firm can earn a high return on its investment. At the same time, concentrated marketing involves higher than normal risks. The particular market segment can turn bitter.
2. Selective specialization: In this strategy, the firm selects a number of segments (see following figure), each objectively attractive and appropriate, given the firm’s objectives and resources. There may be little or no synergy between segments but each segment promises to be a money maker.
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| Selective Specialization |
This strategy has the advantage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can continue to earn money in other segments.
3. Product specialization: The firm makes a certain product that it sells to several segments (see following figure). An example would be a microscope manufacturer who sells to university, government, and commercial laboratories. The firm makes different microscopes for the different customer groups and builds a strong reputation in the specific product area. The downside risk is that the product may be supplanted by an entirely new technology.
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| Product Specialization |
4. Market specialization: The firm concentrates on serving many needs of particular customer group (see following figure). An example would be a firm that sells an assortment of products only to university laboratories. The firm gains a strong reputation in serving this customer group and becomes a channel for addition products the customer group can use. The downside risk is that the customer group may suffer budget cuts.
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| Market Specialization |
5. Full market coverage: When a company decides to enter all or at least most segments, full coverage market segmentations is used. This is a high sales strategy, since greater penetration into each segment is combined with broad coverage of a total market (see following figure).
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| Full Market Coverage |
Extensive resources are required to implement the strategy because it affords limited opportunity for economies of scale. Full coverage market segmentation is therefore most likely to be adopted by a large organization.
6. Niche marketing: The niches are the market segment that has been neglected by large organizations. Market niches are identified by dividing the market segments into sub-segments or by identifying customer groups whose needs have not been met by the large organizations.
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| Niche Marketing |
Many companies succeed by producing a specialized product aimed at a much focused segment of market (or ‘niche’). In this pattern an organization concentrates on niche market segments to exploit market opportunities.
