What is a 'Target Market'

A target market is the market a company wants to sell its products and services to, and it includes a targeted set of customers for whom it directs its marketing efforts. Identifying the target market is an essential step in the development of a marketing plan. A target market can be separated from the market as a whole by geography, buying power, demographics and psychographics.

BREAKING DOWN 'Target Market'

A company invests significant amounts of time and capital to define and monitor its target market. Not all products and services are meant for all types of consumers, and consumers are often cautious with their spending power. For this reason, target markets are typically segregated by age, location, income and lifestyle. A company defines its target market by the consumers that are likely to have a need for its product. Defining a specific target market allows a company to hone in on specific market factors to reach and connect with customers through sales and marketing efforts.

Testing of the target market often occurs in a phase before the product release. In this phase, a company may use limited product rollouts and focus groups, allowing the product managers to get a feel for which aspects of the product are the strongest. Once a product is released, the company can continue to monitor the demographics of its target market through sales tracking, customer surveys and various other activities that allow the company to understand what its customers demand.

Significant Factors About the Product

The target market is a central focus within a marketing plan that determines other essential factors for the product, such as distribution, price and promotion efforts. The target market also determines significant factors about the product itself. In fact, a company may tweak certain aspects of a product, such as the amount of sugar in a soft drink, so that it is more likely to be purchased by consumers with varying tastes.

As a company’s product sales grow, it may also be able to expand its target market internationally. International expansion allows a company to reach a broader subset of its target market in different regions of the world. In addition to international expansion, a company may also find that its domestic target market expands as its products gain more traction in the marketplace. Expanding and growing target markets are all the more reason for companies to monitor their sales and customer preferences for evolving revenue opportunities.

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