Selecting a Target Market Examples

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Examples of How to Select a Target Market

Market segmentation is a fundamental marketing strategy that helps businesses identify and focus on specific groups of consumers with similar needs and behaviors. By tailoring their offerings to these segments, companies can improve customer satisfaction, differentiate their brand, and drive profitability. This article explores three practical examples of market segmentation across industries: sports shoes, fast food, and hotels. Each example demonstrates how segmentation supports strategic decision-making, target market selection, and competitive advantage.

Example 1 = Sport Shoes Segments

Using the list of evaluation/assessment points, let’s review how a firm would evaluate three different market segments. For this example, we will use a manufacturer of sports shoes who has identified four market segments, as per the following segmentation tree diagram.

 

 

A quick description of each of these market segments is provided in the following table:

Market segment

Description of the segment
Elites These are professional sports people or consumers who compete in sports at a top level.

There are after the latest technology and features in a sports shoe for specifically designed for their chosen sport.
Keeping fit Note: This is the firm’s current target market.

This segment consists of consumers who regularly exercise or play sports at a social level.

They want a good quality shoe that provides reasonably good value.
Daily comfort These are people who wear sports shoes on an everyday basis, simply because they are comfortable.

They do not generally participate in sports. They sports shoes for walking, going to the shops, around the house, and so on.

They are interested in the comfortable shoes at a fair price.
Fashion This group of consumers are very interested in the fashion elements of sports shoes.

They generally do not participate in regular sports, but do like shoes that have an unusual design, color, features and so on.

They wear the shoes as part of their fashion and dress sense.

 

As noted above, the firm currently targets the ‘keeping fit’ market segment. This means that they have three additional market segments to evaluate and consider. Using the assessment criteria outlined in the above section, these three potential markets will be explored, as shown in the following table.

 

Segment Assessment Factor

Elites segment

Daily comfort segment

Fashion segment
Financial Issues
Segment size

Likely to be a relatively small segment

 

Would be the largest segment of the three under consideration

Probably a small to medium-sized segment

 

Rating: Poor

Rating: Good

Rating: Fair
Segment growth rate

Would be a fairly stable segment with limited growth prospects

Would be a mature market as well

Probably has reasonable growth prospects

 

Rating: Poor

Rating: Poor

Rating: Good
Profit margins

Higher profit margins are likely, as consumers would not be overly price sensitive

Moderate profit margins, as significant competition exist, with a reasonable number of budget offerings

Likely to have higher profit margins, as price is a minor attribute in the purchase decision

Rating: Good

Rating: Poor

Rating: Good
Structural Attractiveness
Competitors

Would have a number of specialist competitors, who would have a strong brand and loyal customers

This segment would be targeted by an array of competition including many indirect competitors

Fairly competitive segment as well, mainly from traditional fashion shoe providers

Rating: Poor

Rating: Poor

Rating: Poor
Distribution channels

Would have a good degree of channel overlap with current target market, but would need to access some specialty retailers

Would be able to meet this shopping preferences of some of the target market, it would probably have to move into Department stores and discount stores to a large extent

May have some exposure to the target market, but would have to look at more fashion oriented stores

Rating: Good

Rating: Fair

Rating: Poor
Strategic Direction
Strategy

Would assume that the brand reputation of competing in this target market would align to strategy

Probably a relatively easy market development approach for the firm

Is a move into an unrelated market segment and may not be part of their core strategy

Rating: Good

Rating: Good

Rating: Poor
Goals

Would assume that they have growth goals and enhancing the credibility of their brand

Would assume growth goals, but they may be concerned about being seen as a generalist shoe

Access to the target market would help the company grow, but it is quite divergent from their current operations

Rating: Good

Rating: Good

Rating: Fair
Marketing Expertise
Resources

Would require is new products to be designed and developed, so a reasonable level of cost

Could market to this segment with your existing product range and some existing retailers, so relatively low-cost

Would require new products, potentially new designers in the firm, and the establishment of new distribution channels so relatively high-cost

Rating: Fair

Rating: Good

Rating: Poor
Capability

May be concerned whether they have the technical ability to produce a range of elite sports shoes

Minor concern of the challenge of accessing department stores and discount channels

The major skill set challenge here is their ability to produce fashionable designs on a regular basis

Rating: Poor

Rating: Good

Rating: Poor
Role of brand

Brand reputation is important and they will be competing against established specialists. They may have trouble in gaining credibility with some of the target market audience

Their existing brand would be easily leveraged into this more general market, but there is a concern that  their existing brand equity may be eroded in their traditional target market

Leveraging the brand into a fashion segment may dilute the value of their existing brand equity, or alternatively they would need to build a new brand for this segment

Rating: Fair

Rating: Fair

Rating: Poor
Opportunity Cost
Growth options

As little is known about the other growth prospects, we would need make the assumption, across the three market segments, that a market development approach is the best choice at this stage for the firm

Rating: Good

Rating: Good

Rating: Good
OVERALL ASSESSMENT

Rating: Fair-Good

Rating: Good

Rating: Poor

The overall assessment at the bottom of the table has been based upon a simple review of each assessment rating. In real life, organizations are likely to have weightings each of these assessment items, which means, that depending upon their current position, some assessment items might be considered more important others. In particular strategic and financial issues are often highly regarded by organizations.

However, as you can see, at the end of this evaluation process, we have a fairly objective assessment of each of three market segments. In this case (based on the information presented), the firm would most likely select the ‘daily comfort’ segment to become their next target market. They may also select the ‘elite’ segment as another target market (perhaps now or in the future). And finally, it is likely that the organization would rule out competing in the fashion/sports shoe market at this time, (however, they may revisit that decision sometime in the future).

Example 2 = Fast Food Segments

Let’s use an example with three potential market segments for a fast food chain, namely:

  1. Families with Kids
  2. Young Adults
  3. Health-Conscious Consumers
Market Segment Description
Families with Kids Parents visiting with children, looking for value meals, kids’ menus, and play areas. Convenience and cost-effectiveness are critical.
Young Adults Students and professionals seeking quick, affordable, trendy options. They prefer customization, and they are attracted to marketing gimmicks.
Health-Conscious Consumers Consumers who prioritize healthy options like salads, organic ingredients, and transparency about nutritional content.

Evaluation of Each Segment

Segment Assessment Factor Families with Kids Young Adults Health-Conscious Consumers
Financial Issues
Segment Size Large; families are a substantial market. Medium; appeal varies by brand and trends. Small; niche but growing segment.
Rating Good Fair-Good Fair
Segment Growth Rate Stable; consistent needs for dining out. High; driven by convenience and social trends. Moderate; increasing focus on health.
Rating Good Good Fair-Good
Profit Margins Moderate; demand value and deals. High; less price-sensitive for quality/taste. Moderate; pay premium for health.
Rating Fair-Good Good Fair-Good
Structural Attractiveness
Competitors High competition for families across chains. Highly competitive; appeal to the same base. Moderate; niche positioning reduces overlap.
Rating Poor-Fair Poor-Fair Fair
Distribution Channels Well-covered with existing setups like play zones. Strong overlap with existing QSR networks. Requires upscale or unique outlets.
Rating Good Good Fair
Strategic Direction
Fit with Strategy Aligns with value-driven family brand. Easy to incorporate into branding strategies. May conflict with traditional fast food image.
Rating Good Good Fair
Goals Consistent with growth and retention strategies. Aligns with modernization and trendy appeal. Supports diversification for healthy options.
Rating Good Good Fair-Good
Marketing Expertise
Resources Low; existing menus and setups suffice. Moderate; involves trendy menus or tech. High; requires new product lines and partners.
Rating Good Fair-Good Poor-Fair
Capability Easily manageable with current assets. Requires some investment in tech/trends. Demands significant expertise.
Rating Good Fair-Good Fair
Role of Brand Critical; family-friendly identity is vital. Brand personality matters; modern, appealing. High risk to existing brand positioning.
Rating Good Good Fair
Opportunity Cost
Growth Options Long-term stable growth potential. High short-term growth from trends. Requires long-term investment to establish.
Rating Good Good Fair-Good
OVERALL ASSESSMENT Good Fair-Good Fair

Insights

  1. Families with Kids
    Best Target Segment due to alignment with brand strategy and ease of implementation. Stable, but highly competitive.
  2. Young Adults
    Second Priority. Potential for strong growth but faces high competition and demands consistent innovation.
  3. Health-Conscious Consumers
    Niche Option. Challenges in maintaining brand alignment and profit margins make this segment a longer-term play.

Example 3 = Hotel Segments

Let’s use an example with three potential market segments for a hotel chain, namely:

  1. Luxury Leisure Travelers
  2. Budget-Conscious Tourists
  3. Business Travelers
Market Segment Description
Luxury Leisure Travelers High-income individuals or families seeking upscale amenities, exceptional service, and unique experiences.
Budget-Conscious Tourists Travelers looking for affordable accommodations without compromising basic comfort and convenience.
Business Travelers Professionals needing efficient, well-located accommodations with business facilities like meeting rooms and high-speed internet.

Evaluation of Each Segment

Segment Assessment Factor Luxury Leisure Travelers Budget-Conscious Tourists Business Travelers
Financial Issues
Segment Size Moderate; smaller but highly lucrative segment. Large; appeals to diverse demographics. Medium; depends on location and seasonality.
Rating Fair-Good Good Fair-Good
Segment Growth Rate High; increasing demand for unique experiences. Moderate; stable but competitive market. Stable; tied to economic conditions.
Rating Good Fair-Good Fair
Profit Margins High; willing to pay a premium for exclusivity. Low; price-sensitive market. Moderate; price-sensitive but predictable.
Rating Good Fair Fair-Good
Structural Attractiveness
Competitors Strong competition from luxury chains and resorts. High competition from budget chains. Competition varies by location and brand.
Rating Fair Fair Fair-Good
Distribution Channels Established partnerships with OTAs and agencies. Accessible via online booking platforms. Strong reliance on corporate tie-ups.
Rating Good Good Good
Strategic Direction
Fit with Strategy Aligns with upscale branding and differentiation. Easy to integrate into existing services. Aligns with focus on efficiency and loyalty.
Rating Good Good Good
Goals Supports growth and enhances brand value. Fulfills occupancy goals during off-seasons. Consistent revenue from recurring bookings.
Rating Good Good Good
Marketing Expertise
Resources High; demands superior facilities and staff. Low; requires only basic accommodations. Moderate; business-focused infrastructure.
Rating Fair-Good Good Good
Capability Strong emphasis on unique experiences and luxury. Easily achievable with current resources. Requires strategic focus on efficiency.
Rating Good Good Good
Role of Brand Crucial; luxury identity is key to success. Important but less impactful than pricing. High; corporate partnerships drive loyalty.
Rating Good Fair-Good Good
Opportunity Cost
Growth Options Long-term potential in niche luxury markets. Provides volume but limited brand growth. Stable, consistent growth opportunity.
Rating Fair-Good Fair Good
OVERALL ASSESSMENT Good Fair-Good Good

Insights

  1. Luxury Leisure Travelers
    Ideal for Premium Brands. Offers high margins and opportunities for brand differentiation. Requires significant investment and consistent quality.
  2. Budget-Conscious Tourists
    Volume-Driven Option. Appeals to a broad base but challenges in maintaining profitability and differentiation. Best suited for secondary or mid-tier brands.
  3. Business Travelers
    Stable Revenue Stream. Reliable segment with predictable needs. Aligns well with locations near business hubs and airports.