Lecture Four: Targeting

Once you have split your market into segments of potential consumers you will then move onto what is know as Targeting which is the second stage in the practice of STP. Defined as "The process of evaluating each market segment's attractiveness and selecting one or more segment to enter." Kotler et al. (2008) just shows the importance of this stage; as it is the actual selection of a group on consumers that should be affected the most by what the company has to offer.

Now as suggested in Kotler's definition it is the evaluation and selection of segments. This means that their must be 2 stages, the first is obviously the evaluation of each segment and this is achieved by comparing the segment to a set of criteria, which are:

Segment Size & Growth





- This will include looking at current segment sales, growth rates and expected profitability, with also the right size and growth to match the company. It is also invaluable to understand that the biggest and fastest growing segments are not always the best as the segment is too big and fast moving for the company to viably keep up.




Segment Structural Attractiveness





- This is where you need to consider the players within the segment, a company may not want to enter a segment that is over crowded or highly competitive as it could limit the profitability of the segment. The consumers influence in the segment also has to be considered because segments with high buyer power could mean that all prices are driven down creating more aggressive competition.




Company Objectives & Resources





- Touched on in the first point, even if the top 2 criteria are met the company may simply have to let that segment go because they are not big enough themselves for it to work. The company also has to think about its own long term goals and if they don't join the the segment wont be selected.

Once the segments have been evaluated the company is in a much more informed position to make its selection of the segments; now the company may only choose one segment but at the same time it's not uncommon for a company to choose multiple segments. Really though, a company should only pick segments that will offer them real value and at the same time get on over on the competitors. After the segment(s) have been selected to be targeted by the company they become what is know as a Target Market. Kotler et al. (2008) defines a Target Market as "A set of buyers sharing common needs or characteristics that the company decides to serve." which you couldn't really put any better. The target markets will contain smaller numbers than the overall market and will respond better to what the company puts out there.