Choosing a Target Market and Positioning (AQA A-Level Business): Revision Notes
Choosing a Target Market and Positioning
Understanding market targeting and positioning
Market targeting involves selecting a specific market segment (or target market) on which to focus marketing efforts. This is a crucial early step when developing any marketing plan. Rather than trying to appeal to everyone, businesses identify particular groups of consumers who are most likely to buy their products.
Market positioning describes how consumers perceive a particular brand compared to competing brands. The aim of a marketing strategy is often to establish a clear, unique and advantageous position in consumers' minds. This perception influences purchasing decisions and brand loyalty.
Exam tip: Market positioning links closely to market mapping. Businesses use market mapping to determine where their product or service sits in relation to competitors, helping them identify the most effective positioning strategy.
The process and value of segmentation, targeting and positioning
These three concepts work together as a sequential process:
The STP Sequential Process
Segmentation → Targeting → Positioning
This three-stage approach moves from understanding the market, through selecting target segments, to creating the desired brand perception.
Market segmentation divides the overall market into clearly definable groups. Businesses might segment by age, gender, income, social class or geographical area. Once the market has been segmented, the business can identify which groups represent the best opportunities.
Targeting follows segmentation. The business decides which segment(s) to focus on and determines how it wants to position its offering within that chosen market. Key considerations include pricing strategy, quality perception, and overall brand image.
Positioning completes the process. This involves creating the desired perception of the product or service in consumers' minds within the target market.
Benefits of this approach
The segmentation-targeting-positioning process offers several advantages:
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Enhanced marketing effectiveness - Marketing messages can be directed specifically at the target group, with clear communication about the product's positioning. This focused approach typically generates better results than broad, unfocused campaigns.
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Improved resource efficiency - By concentrating on specific segments, businesses avoid wasting resources on consumers unlikely to purchase. Marketing budgets go further when spent on well-defined target audiences.
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Increased sales and market share - The clear focus of marketing efforts often leads to higher sales within the target segment and greater overall market share.
Potential drawbacks
However, this approach has limitations:
Key Risks to Consider
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Risk of overlooking profitable segments - By concentrating on particular market segments, businesses may miss opportunities in other areas that could prove profitable. The focus required for effective targeting can create blind spots.
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Vulnerability to market changes - Businesses heavily focused on specific segments may fail to notice shifts in consumer tastes and fashion trends. This can leave them exposed when preferences change.
Influences on choosing a target market and positioning
Several factors shape decisions about target markets and positioning:
Nature of the product
The actual characteristics and qualities of the product significantly influence targeting decisions. What makes the product different? What is it used for? These features help determine which market segments will find it most appealing.
Competition
The competitive landscape matters considerably. Businesses may deliberately avoid market areas that are highly competitive, preferring segments where they can establish a stronger position. Alternatively, they might identify gaps in competitive offerings that represent opportunities.
Consumer needs
Products can be developed specifically to meet the needs of particular consumer groups. Understanding what different segments want and need helps businesses decide which markets to target and how to position their offerings.
Niche marketing vs mass marketing
A fundamental decision businesses face is whether to pursue niche marketing or mass marketing.
Niche marketing
Niche marketing involves identifying and satisfying the needs of small, specialized segments within a larger market.
Example: Classic FM
Classic FM targets the niche segment of people who want to listen to popular classical music, rather than competing for the entire radio audience. By focusing on this specific segment, they've established a clear position and loyal listener base.
Advantages of niche marketing
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First-mover advantage - The first company to identify and serve a niche market can often achieve a dominant market position. Consumers become loyal to the product, even if competitors later offer similar products at lower prices.
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Premium pricing opportunities - Niche markets can be highly profitable because companies operating in them often have the opportunity to charge premium prices. Loyal customers may be willing to pay more for specialized products.
Disadvantages of niche marketing
While niche marketing offers advantages, businesses must consider these challenges:
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Limited sales volume - Sales in niche markets tend to be relatively low. This means firms may struggle to spread fixed overhead costs over sufficient sales volume to achieve acceptable profit margins.
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Attracting competition - If a niche market proves profitable, it will likely attract new competitors. This makes the market less attractive to the companies that originally discovered it, potentially eroding the first-mover advantage.
Mass marketing
Mass marketing occurs when businesses aim their products at most of the available market. Many small and medium-sized businesses operate in mass markets.
Requirements for mass marketing success
Businesses must be able to produce on a large scale to sell successfully in mass markets. This typically means significant investment in resources such as buildings, machinery and vehicles.
Often, firms operating in mass markets need to adopt competitive pricing to flourish. Alternatively, they may develop a unique selling point (USP) that makes the company and its products distinctive, allowing them to stand out despite broader competition.
Key Points to Remember
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Market targeting and positioning work together - targeting identifies who to sell to, while positioning determines how consumers perceive the brand relative to competitors.
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The STP process (Segmentation → Targeting → Positioning) creates focused, effective marketing strategies that use resources efficiently.
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Niche marketing targets small specialized segments and can generate loyalty and premium prices, but risks limited sales and attracting competitors.
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Mass marketing requires large-scale production capabilities and either competitive pricing or a strong unique selling point to succeed.
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Various factors influence targeting decisions, including the product's nature, the competitive environment, and specific consumer needs in different segments.