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Article Details

Published Date: 6-10-2009
Author: Executive Compass
Category: Tender Writing & Bid Management
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Most firms carry out some form of customer targeting. This may be a conscious decision or a decision based on tradition and history.

It could even be accidental, but you are targeting customers even if you don’t think you are!

Most firms are in a position to decide which particular segments to target (even if they don’t realise it)

I have outlined some of the factors that influence the attractiveness of a segment and they are perhaps worth considering when deciding which customers you could target:

1. Segment size and growth potential: A segment should be a reasonable size and show good signs of growth potential if it is to be worth targeting. This is of course relative and small businesses can base this decision on geography or a whole host of other criteria if they wish.

2. Profitability of the segment: Some segments may be large and growing but it may be difficult for organisations to make a profit.

3. Current and potential completion: The fewer the competitors the more likely you are to find the segment attractive. However, be careful! Have you really stumbled across an untapped market or is it because it is not worth targeting?

4. Capabilities: Make sure you match your own organisations capabilities with the needs of the segment.

These factors should be thought about in combination and not in isolation. Decide on which and how many segments to target because you will undoubtedly have constraints on your resources, be it time, energy or the old favourite-money!

Even as a small business owner there are a number of targeting strategies available to you.

1. Undifferentiated: This is the easiest one to follow and many organisations do it without even realising. Here the differences between the segments are simply ignored. The thinking being that everyone can be targeted everywhere via the same communications, distribution and costs. Many small businesses often operate this strategy, perhaps with not the whole of their potential market, but very often with clusters of segments, if not monitored this can cause loss of sale and profit. Remember Henry Ford “you can have any colour as long as its Black” On the flipside MacDonald’s offer a more or less undifferentiated product.

2. Differentiated Targeting: You may decide to target more than one segment, but the segments may have characteristics that make it difficult to appeal to them all at the same time. So you change your product or an element of the product depending on the segment and it is designed to meet the needs of the customers within that segment. The common mistake that some small business owners make is to offer the same unchanged product across different segments. A good example of this type of targeting would be airlines, they slightly alter their product to match the target group. 1st class, economy, business etc. Web developers also do it with web sites.

3. Focused Targeting: Simply concentrate on one segment. It allows you build up a good understanding of your customers and to build a good reputation because you understand the specific customer requirements. This single segment targeting is sometimes known as niche targeting. Executive Recruitment would be an example.

4. Customised Targeting: This used to be reserved for customers who require an extremely high degree of specialisation and were prepared to pay for it. However customised targeting is becoming more common because of the accessibility of databases and the ease of use of technology. Just about any company can now customise their products for a particular segment. Think how Amazon personalises your pages or how other web sites remember your preferences and purchases. LinkedIn has “viewers of this profile also viewed” and this is a type of customised targeting.

Whatever segment(s) you decide to target they should possess four key characteristics, they should be of a suitable size, it members should be easily identifiable, it should be relevant to your product or service and it should be accessible to you.

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