Target Market Attributes (VCE SSCE Business Management): Revision Notes
Target Market Attributes
Understanding who your customers are and what they want is fundamental to successful business marketing. This note explores how businesses identify and analyse their target markets, understand consumer behaviour, and respond to market trends.
Understanding markets
A market consists of customers and potential customers who share similar needs and wants, and who may purchase goods or services by exchanging money or other items of value.
Types of markets
Businesses operate across different market categories, each with distinct characteristics:
| Type of market | Explanation |
|---|---|
| Consumer | Involves selling mass consumer goods (soft drinks, food, household products) directly to individual customers and end users |
| Business | Purchasers are other businesses, often represented by well-trained professional buyers |
| Global | Businesses that export products or services internationally |
| Not-for-profit and government | Organisations providing assistance or infrastructure to society |
Understanding which market type a business operates within helps determine appropriate marketing approaches. For instance, marketing to professional business buyers requires different strategies than marketing to individual consumers.
Market dimensions and segmentation
From mass marketing to targeted approaches
Mass marketing is a strategy that attempts to attract all market segments using widespread distribution channels and mass media advertising. While this approach creates broad awareness, it faces significant challenges. Businesses like Netflix, Stan, Amazon Prime and Foxtel Now use mass marketing for their streaming services, incurring high costs through television, print and digital advertising.
Mass marketing assumes all customers have identical needs, which is rarely true. The result is often inefficient spending with limited "buy-in" from consumers.
To improve effectiveness, businesses divide the mass market into segments. This process, known as market segmentation, sits midway between mass marketing (targeting everyone) and individual marketing (targeting one person). It involves defining and subdividing a large generic market into distinct subsections of potential customers with similar specific needs and wants.
A market segment should be a relatively homogeneous (similar) group of customers likely to respond in comparable ways to marketing efforts. This allows businesses to allocate scarce resources more effectively and achieve objectives more efficiently.
The four dimensions of market segmentation
Consumer markets are typically divided using four bases of segmentation, each with specific variables:
| Geographic | Demographic | Psychographic | Behavioural |
|---|---|---|---|
| Where customers live or work: - Region (world or country) - City size - Suburban or rural location - Climate (hot, cold, temperate) | Statistical characteristics: - Age - Gender - Income level - Education level - Family size - Family life cycle - Occupation - Nationality/ethnicity | Personality and lifestyle factors: - Social class (upper, middle, lower middle) - Personality traits (compulsive, gregarious, ambitious, aggressive, extroverted, introverted) - Lifestyle (achiever, socially aware, conservative, optimist) | Purchase patterns: - Needs (economic, functional, physiological, psychological, social) - Benefits sought (quality, service, economy, speed) - Loyalty status - Shopping type (convenience, comparison, speciality) - Purchase frequency |
The marketing mix (the seven Ps: product, price, place, promotion, people, physical evidence and process) is applied differently to each segment based on these variables.
Building customer profiles
The more variables a business can identify, the more detailed its customer profile becomes.
Building a Customer Profile: Dulux Paint
Dulux (paint manufacturer) defines its customers as people who:
- Are building, renovating or redecorating
- Value reputable and trusted brands
- Are willing to pay premium prices for quality
- Seek innovative paint ideas in colours and finishes
- Are comfortable using websites for information
- Purchase through major hardware chains
This detailed profiling enables Dulux to target marketing precisely and develop products that meet specific customer needs.
Identifying target markets
The narrowing-down process
Once segmentation is complete, businesses must select which segment to pursue. This requires identifying the actual target market – the specific group of customers the business wants to reach with its products and services.
This process involves narrowing from a broad generic market (where broadly similar needs are met by diverse products) to a specific customer type. Consider the drinks market: the entire market satisfies thirst (generic market). When consumers seek a specific drink type, such as sports drinks, this becomes a product market – where consumers look for particular items rather than just any product meeting a general need.
In the car market example: the entire car market satisfies private transport needs (generic market). When consumers narrow their search to prestige cars, brands like Mercedes, BMW or Audi compete in that specific product market. Consumer preferences for smaller, fuel-efficient cars, SUVs, or electric vehicles create additional product markets.
Market positioning
After identifying segments and selecting a target market, businesses must differentiate their product or service from competitors. This strategy is market positioning – placing a product within a market according to its image, price and target market age characteristics.
The STP framework (Segmentation, Targeting, Positioning) summarises this strategic approach to effective marketing.
Niche markets
Within target markets, businesses may identify niche markets – subsets of larger markets with particular needs or preferences. Operating in niche markets offers strategic advantages because it allows focused marketing efforts on clearly defined, less competitive markets where specific needs often remain unmet.
Attributes of ideal niche markets
An effective niche market exhibits these characteristics:
- Customers have distinct, specific needs
- Customers often pay premium prices for products meeting their needs
- Few or no competitors exist
- Products or services allow specialisation
- The market permits profit and growth
Niche Marketing: Melbourne's Coffee Industry
Melbourne's coffee industry demonstrates niche marketing effectively. While filtered coffee is a standard product, organic, dry-roasted coffee becomes a niche speciality product. This creates expectations of superior quality and environmental benefits.
Cafes serving this speciality can charge higher prices due to the perceived added value, demonstrating how niche markets support premium pricing strategies.
Consumer trends
Monitoring and responding to consumer trends is essential for business success. The marketing function must understand current and evolving trends to support business objectives effectively.
Impact of major events
The 2019-20 bushfire crisis and COVID-19 pandemic significantly impacted Australian retail and business sectors. These events created emotional connections between consumers and brands, whilst lockdowns and physical distancing measures accelerated digital adoption.
COVID-19 related trends
E-commerce acceleration: Movement restrictions dramatically increased online sales. According to Australia Post's Inside Australian Online Shopping: eCommerce Industry Report 2021, online retail spend reached 16.3% in 2020, reflecting 57% year-on-year growth. Consumers spent more time browsing, researching and purchasing online.
Suburban shift: Multiple lockdowns and work-from-home orders negatively impacted CBD retailers, particularly department stores. Conversely, local shopping increased as people supported neighbourhood businesses. Consumers showed greater interest in Australian-made products and supporting local brands. For example, Driza-bone garments (designed in Melbourne) and Rossi Boots (designed and made in South Australia) experienced increased demand.
Changed purchase mix: More time at home changed what consumers bought. Initial purchases focused on furniture, electrical goods and home furnishings. Home cooking increased grocery sales, whilst garden product sales rose as people spent time in their own gardens rather than local parks. Leisurewear sales increased whilst workwear declined.
Ongoing consumer trends
Businesses must continuously monitor and adapt to evolving consumer trends. The following trends represent significant shifts in consumer behaviour that impact marketing strategies across multiple sectors.
Fresh produce shopping: Despite e-commerce growth, customers prefer inspecting fresh produce in-store to assess quality and value. Farmers' markets across metropolitan and regional areas support this trend. Customers willingly pay price premiums for the satisfaction of purchasing directly from producers, developing personal relationships with growers, and obtaining information about growing methods. This trend also satisfies desires for "greener food" and reduced "food miles".
One-stop shopping: Retailers increasingly add related and unrelated merchandise to core products. Many retail stores now include coffee shops, capitalising on "cafe society" trends.
Ready-to-eat meals: Whilst ready-to-heat meals have existed for years, consumers now seek "gourmet" options beyond basic offerings. Services like HelloFresh and Marley Spoon meet desires to cook by supplying specific gourmet ingredients for preparing complete meals. Restaurants offer gourmet delivery through services like UberEats, Deliveroo and DoorDash. Fast-food chains such as KFC and McDonald's have implemented double-lane drive-throughs for efficient service.
Electronic payments: Digital transaction adoption has accelerated, with consumers expecting convenient electronic payment options. Systems include tap-and-go (contactless), credit/debit cards, EFTPOS, online payments, and smartphone/tablet processing.
24/7 purchasing: Consumers seek retailers providing fast, convenient service anytime, particularly for goods and services saving time in busy lives. This drives internet purchasing, where orders are delivered to designated addresses. Coles and Woolworths established centralised fulfilment centres for home-delivered groceries, dispatching orders directly rather than using individual stores. Online services are also used for booking flights, holidays and entertainment.
Personalisation: Many consumers want individualised purchasing experiences, tired of mass marketing approaches. They desire to be heard and treated as special. Cotton On offers personalised services where customers' initials or names can be added to various items including diaries, dressing gowns, slippers, handbags, towels, pyjamas, footless tights and children's clothing.
Health consciousness: Consumers are better informed about nutrition and more aware of environmental and social issues. They engage in consumption supporting diet, fitness and ideal lifestyles. Businesses respond by providing packaging information about nutrition, fair trade and sustainability.
Ethical scrutiny: Growing numbers of consumers question business motives and practices. They demand evidence of ethical labour, product and supply-chain practices to justify purchasing decisions. This scepticism leads to questioning of marketing campaigns, brand images and business practices.
Tweens emergence: A consumer group called "tweens" (no longer little children but not yet teenagers) forms a new market. This empowered group seeks products and experiences previously appealing to teenagers, benefiting streetwear, cosmetics and entertainment industries whilst posing challenges for traditional toy manufacturers.
Consumer behaviour
Consumer behaviour studies the behaviours and strategies customers use when choosing, using and disposing of products or services. Understanding these patterns helps businesses anticipate how customers will respond to marketing strategies.
Five factors influencing consumer behaviour
When customers are individuals or household members, five key factors influence their purchasing decisions:
| Cultural | Social | Personal | Psychological | Situational |
|---|---|---|---|
| Inherent values and beliefs developed through parental and environmental influences, including nationality, religion, ethnic background or social groupings | Actions and beliefs of those with whom they associate, including family, peers, sport, religious or community groups | Consumer's age, life stage (single, newly married, married with dependents, single parent, divorced with dependents, widowed), occupation, economic situation, lifestyle and personality | What motivates the consumer to purchase particular products or services | When: particular time of day, week or season?
Where: where buying decisions are made and purchases occur (planned or impulsive)
How: behavioural issues such as single or multiple pack purchases |
Understanding purchase decisions
Whilst marketers understand influencing factors, predicting actual deciding factors for purchases remains challenging. Decisions may be based on:
- Satisfying practical needs
- Emotional or impulsive actions
- Logical (rational) or irrational reasoning
- Research report recommendations
The complexity of human decision-making means multiple factors often interact. For instance, a consumer might choose a product because it meets a practical need (functional), friends recommend it (social), it fits their self-image (personal/psychological), and it's on sale today (situational).
Applying target market concepts: case study
Case Study: Smiggle's Target Market Strategy
Smiggle demonstrates effective target market identification and consumer behaviour understanding. Opening in Melbourne in 2003, Smiggle aimed to become the world's most exciting stationery brand. Its colourful, fun, fashion-forward stationery targets school, lifestyle and stationery product categories including bags, lunchboxes, drink bottles, pencil cases, books, writing tools, headphones, collectibles and accessories.
From 20 original stores, Smiggle expanded to over 300 wholly-owned stores across 10 countries, plus representation in prestigious department stores including Harrods and Selfridges.
Products are well-designed and innovative, using bold colours and quirky graphics. Smiggle's goal is "to inspire and develop the creative spirits of its customers, by delivering original, fun and affordable stationery". Store fit-outs are extremely colourful and bright, creating memorable shopping experiences.
Target market analysis: Smiggle primarily targets:
- Primary demographic: Children aged 5-14 (particularly "tweens")
- Secondary demographic: Parents making purchasing decisions
- Psychographic: Creative, fashion-conscious, fun-seeking individuals
- Behavioural: Regular school attenders seeking unique, trendy stationery
Consumer behaviour factors addressed:
- Cultural: Appeals to contemporary youth culture valuing individuality and creativity
- Social: Products facilitate peer group belonging and self-expression
- Personal: Products suit various age groups within target range, supporting developing personalities
- Psychological: Satisfies desires for fun, creativity and standing out
- Situational: Stores create engaging shopping environments encouraging impulse purchases
Exam technique: analysing target markets
Effective Exam Strategy for Target Market Questions
When answering exam questions about target markets:
- Identify – State the specific market segment(s) clearly
- Describe – Explain characteristics using segmentation variables (geographic, demographic, psychographic, behavioural)
- Analyse – Explain how the business's strategies suit this target market
- Evaluate – Assess effectiveness, considering advantages, limitations and alternatives
For "discuss" or "evaluate" questions, consider:
- How well does the strategy align with target market needs?
- What evidence supports or contradicts effectiveness?
- Are there limitations or risks in the approach?
- Could alternative strategies be more effective?
Remember!
Key concepts:
- Market segmentation divides large markets into homogeneous groups with similar needs, enabling more efficient resource allocation
- Target markets are the specific customer groups businesses choose to pursue after segmentation
- Niche markets are smaller, specialised segments often commanding premium prices with less competition
- Consumer trends reflect changing patterns in what, how and why customers purchase, requiring ongoing business monitoring and response
- Consumer behaviour is influenced by five key factors: cultural, social, personal, psychological and situational
Key terms:
- Market: Customers with similar needs who may purchase through exchange of value
- Mass marketing: Strategy attracting all segments through widespread distribution and media
- Market segmentation: Subdividing large markets into distinct subsections with similar needs
- Market positioning: Placing products within markets according to image, price and target demographics
- Generic market: Broadly similar needs met by diverse products
- Product market: Consumers seeking specific item types
- Niche market: Subset with particular needs or preferences
- Consumer behaviour: Study of customer behaviours and strategies in choosing, using and disposing of products
Exam essentials:
- Use the four segmentation bases (geographic, demographic, psychographic, behavioural) when constructing customer profiles
- Always link consumer trends to business strategies and market positioning
- When analysing consumer behaviour, consider all five influencing factors
- Support answers with real-world business examples demonstrating concepts in practice