Target market strategy

When designing their marketing strategy, organizations have three main choices in regards to their approach to target marketing. The first choice is to ignore the concept of market segments and the differences in consumer needs. With this approach (which is sometimes referred to undifferentiated marketing or mass marketing), the firm will provide a generic (or middle-of-the-road) offering to the marketplace, with the hope that it appeal to some consumers.

The second choice is to focus on one target market only (which is sometimes referred to as concentrated marketing). And the third choice is to adopt a strategy of targeting multiple target markets, each with different marketing mix (which is referred to as differentiated marketing, as the firm differentiates between segments).
 

Definitions of undifferentiated, concentrated and differentiated target marketing

These three terms all refer to how the firm has approached its target market selection. When using undifferentiated target marketing, the firm has decided not to align its market offering to the needs of any segment in particular. Whereas the other two approaches, both recognize the importance of building a market offering around the needs of a defined target market.

Undifferentiated Target Marketing

Undifferentiated marketing, often referred to as mass marketing, involves offering a single marketing mix to an entire market without tailoring it to the needs of specific segments. This approach assumes that all consumers have similar needs that can be met with a universal product and message. It is most suitable in markets with homogeneous preferences, where the demand for customization is minimal.

Definition: The offering of a marketing mix designed to meet the general needs of an overall market without considering the differing needs of specific segments.

Advantages:

• Cost Efficiency: Economies of scale in production, distribution, and marketing.
• Simplicity: Requires less market research and fewer variations in product design and promotion.
• Broad Reach: Targets the largest possible audience, which is beneficial for products with widespread appeal (e.g., basic commodities like sugar, salt).

Disadvantages:

• Vulnerability to Competition: Lack of differentiation makes it easier for competitors to steal market share with specialized products.
• Limited Appeal: May fail to meet the nuanced needs of individual customer groups, leading to missed opportunities in niche markets.

Example: Brands like Coca-Cola in its early days or Ford with its Model T, offering a single product in one standard format to a mass audience.

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Concentrated Target Marketing

Concentrated marketing focuses all resources and efforts on a single, well-defined market segment. This approach is particularly useful for small or specialized firms with limited resources aiming to dominate a niche.

Definition: Concentrating the firm’s market offering solely on the needs of one defined target market.

Advantages:

• In-depth Market Knowledge: Enables a deeper understanding of the specific needs and preferences of the chosen segment.
• Strong Positioning: Builds expertise and a strong brand reputation within the niche.
• Efficient Resource Allocation: Avoids dilution of efforts by focusing on a smaller, manageable audience.

Disadvantages:

• High Risk: Dependency on one segment makes the firm vulnerable to market changes.
• Limited Growth: Constrains scalability and expansion potential compared to broader approaches.

Example: Rolls-Royce targets high-income individuals seeking luxury and exclusivity in automobiles.

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Differentiated Target Marketing

Differentiated marketing involves creating separate marketing mixes for multiple distinct market segments. It caters to the diverse needs of the market, offering customized solutions to different groups.

Definition: The targeting of two or more market segments with separate and distinct market offerings designed to closely meet the needs of those particular segments.

Advantages:

• Market Coverage: Increases the firm’s reach by addressing diverse customer needs.
• Reduced Risk: Diversifies revenue streams across multiple segments.
• Stronger Competitive Position: Differentiation strengthens brand loyalty and creates barriers for competitors.

Disadvantages:

• Higher Costs: Requires more investment in market research, product development, and marketing campaigns.
• Complexity in Management: Managing multiple offerings can be resource-intensive and operationally challenging.

Example: Procter & Gamble markets multiple detergent brands (e.g., Tide, Ariel, and Gain), each tailored to specific consumer preferences like price sensitivity, scent preferences, and cleaning power.

Advantages of each approach

There are legitimate reasons for adopting each of the three broad target market strategy approaches. There is not one approach that is better than the others. The selection would depend upon the organization and its market. As a starting point, the following table outlines the advantages of each approach.

Undifferentiated marketing	Concentrated marketing	Differentiated marketing
Quite suitable for generic markets (where the product is a commodity)	Typically adopted by small firms just starting out (as they have limited resources and expertise)	Ideal for companies wishing to grow
Can be very useful when there is little diversity of core needs between the defined market segments	May be necessary approach for firms with a limited set of capabilities and skills	A necessary approach for large companies wishing to protect their market share
This is a possible approach for large global companies that have strong offerings, (such as Apple with their iPad, which could be considered an example of modern day mass-marketing)	Also used by niche marketers whose competitive advantage is their reputation and expertise within a well-defined, and usually quite small, market segment	A good approach from firms who have assets/capabilities that can be leveraged into other target markets
Typically a good /approach for small or emerging sub markets, where the development of multiple marketing mixes would not be viable	This may be a sensible approach if the organization is has had financial difficulties and needs to conserve resources	A necessary approach where there is a diversity of consumer needs across market segments

What is the difference between differentiated marketing and concentrated marketing?

Differentiated marketing and concentrated marketing are two distinct approaches to targeting market segments, each with unique strategies, operational complexities, and growth potential. Here’s a detailed exploration of their differences, along with strategic considerations and examples.

1. Differentiated Marketing

Definition:
Differentiated marketing involves selecting two or more distinct target markets and designing a unique marketing mix for each. The aim is to address the specific needs, preferences, and behaviors of different customer groups, creating tailored offerings.

Key Characteristics:

• Multiple Target Markets: The firm targets a variety of market segments simultaneously, each with its own tailored products and marketing strategies.
• Customization: Marketing mixes (product, price, place, promotion) are adapted for each segment to better meet specific consumer needs.
• Higher Costs: Requires extensive market research, diversified product development, and complex distribution and promotional strategies.
• Market Expansion: Provides greater potential for growth by appealing to multiple segments with distinct needs.

Advantages:

• Increases market coverage by addressing diverse needs.
• Reduces risk by diversifying revenue streams across multiple segments.
• Builds competitive barriers through tailored offerings and strong customer relationships.

Disadvantages:

• Higher operational complexity and costs due to managing multiple offerings.
• Greater resource requirements for market research and customization.

Example: A car manufacturer like Toyota uses a differentiated marketing strategy by offering diverse models such as:

• Toyota Corolla for budget-conscious consumers.
• Toyota Prius for environmentally conscious buyers.
• Toyota Land Cruiser for off-road enthusiasts.

2. Concentrated Marketing

Definition:
Concentrated marketing, often called niche marketing, focuses all resources on one well-defined target market. It involves offering a single, specialized product or service to a specific segment.

Key Characteristics:

• Single Target Market: The firm dedicates its efforts to serving one niche market with precision.
• Specialization: Develops deep expertise and a strong value proposition within a narrowly defined segment.
• Efficiency: Simplifies production, logistics, and supply chain by focusing on one product or service offering.
• Lower Costs: Avoids the complexities and higher expenses associated with managing multiple marketing mixes.

Advantages:

• Efficient use of resources by focusing on a single segment.
• Builds strong brand loyalty and expertise within the chosen niche.
• Easier to establish a competitive advantage due to specialized offerings.

Disadvantages:

• Higher risk due to dependence on one segment; market changes or economic shifts can significantly impact revenue.
• Limited scalability and growth potential compared to differentiated marketing.

Example: A luxury watchmaker like Rolex uses a concentrated marketing approach, focusing exclusively on affluent customers seeking prestige and timeless craftsmanship.

3. How They Differ

Aspect	Differentiated Marketing	Concentrated Marketing
Target Market	Multiple segments.	Single niche.
Marketing Mix	Tailored for each segment.	Singular and focused on one segment.
Cost Structure	Higher due to customization and complexity.	Lower due to streamlined production and logistics.
Growth Potential	Greater due to wider market coverage.	Limited to the chosen niche.
Risk Profile	Lower, as revenue streams are diversified.	Higher, as reliance is on one segment.
Operational Complexity	High due to managing multiple strategies.	Low due to singular focus.

4. Interplay Between the Two Strategies

Concentrated Marketing as a Stepping-Stone:

• Concentrated marketing is often the starting point for smaller firms or those with limited resources, as it allows them to build expertise and establish a strong foothold in a niche.
• Over time, as the firm gains market knowledge, resources, and brand equity, it can expand into additional segments, adopting a differentiated marketing strategy.

Example Transition:

• A family law firm initially specializes in prenuptial agreements and divorce settlements (concentrated marketing).
• Later, it expands its services to include family trusts, wills, and property advice, addressing broader needs within the same market (differentiated marketing).

5. Summary

• Differentiated marketing is broader and resource-intensive but offers greater growth potential and income diversification.
• Concentrated marketing is more focused, efficient, and cost-effective but involves higher risks due to market dependency.
• The two strategies are not mutually exclusive; firms often begin with concentrated marketing and evolve into differentiated marketing as they grow and diversify.

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