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Strategies to Perform a Target Market Analysis

According to the IIC, there are three necessary steps to analyze the market to which a product is intended to be exported: first, segment it; second, determine the “target”; and third, evaluate the positioning of the product.

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According to the IIC, there are three necessary steps to analyze the market to which a product is intended to be exported: first, segment it; second, determine the “target”; and third, evaluate the positioning of the product.

┬áBefore deciding which market to export their products to, entrepreneurs must carefully analyze the characteristics of each possible place to sell their merchandise. Maybe, for example, a large market seems very attractive at first glance because of the number of potential consumers, but it ends up being a bad business because the population does not have enough consumption capacity. Or it is possible that a market with a public with great capacity for consumption ends up being a bad option for the employer, due to the social habits that cause other products to be consumed. To avoid this type of setbacks, entrepreneurs must carry out what is known as “target market analysis”.

The Inter-American Investment Corporation (IIC) explains that an adequate analysis of the target market must follow a strategy known as “STP”, by the first letters of the three fundamental elements that must be considered: Segmentation, Target and Positioning.

Segmentation

The first step of the analysis is to break down the market into smaller and more homogeneous groups, in order to work properly with them. According to the IIC, these must meet four requirements: first, be definable (having certain common characteristics); second, be achievable (that are part of the market); third, to be homogeneous (that the elements that compose it are not too diverse among themselves); and finally, be profitable (which are, at first sight, considerable as possible objectives for the company).

It is not simply selling, but selling through the most appropriate channel to reach the optimal end customer and in the most efficient way
Once this process is completed, there will be “segments”, which are small markets, both in terms of geography, distribution and consumption. A segment can be based on consumption capacity, habits, the degree of training, or numerous other social factors.

According to the profitability of the segments, there is talk that some of them can constitute “market niches”. These “niches” are segments in which there is a significant opportunity for the entrepreneur to enter the market and compete with possibilities of obtaining good results.

Target

The second step of the analysis is to consider which of these segments the entrepreneur wants to offer his products, that is, which is the “target” segment. For example, the product can be oriented to a group of great purchasing power or to one with a lower consumption capacity, but more massive. Or it can be allocated to a segment located in a specific geographic sector, or to an area that has certain specific consumption patterns.

At this point, the entrepreneur should also consider what are the characteristics of the audience that belongs to these segments; how are the individuals that make up each of these groups.

Positioning

The third step is to study how the product can be positioned in this context. What is the experience we want to offer our consumer? What benefits does our product bring compared to others? What is the competition and how do we want to position ourselves in the market in relation to them?

The IIC explains in detail the importance of product positioning and differentiation with respect to the competition:

“It’s not about simply getting sold, but selling through the most appropriate channel to reach the optimal end customer and in the most efficient way. We must bear in mind that this is not only a way to obtain greater economic benefit, but a necessary condition to remain in the market in the medium term. To introduce a new product or service, you usually have to be able to move another that is already present in the channel, so it is essential that both the distributor and the consumer understand and appreciate properly what are the advantages.”

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