Targeting Helps to Boost Profits
Written by Shirley Lichti for The Record, October 22, 1997

One of the biggest marketing mistakes is the failure to identify a target market. Too many businesses claim "We don’t worry about target marketing because everybody buys our product." The "everybody buys our product" theory is based on the fallacy that for a product or service to be successful, it must appeal to the majority of people.

In truth, the only two things that everyone spends money on are death and taxes. Yet most of us feel the government is targeting our money. And a friend of mine in the funeral business is now working hard at identifying markets to target so her company can better promote its services. So even in cases where everybody spends money, targeting proves useful.

Many successful companies may not target. That doesn’t mean they shouldn’t. Let’s look at some reasons why everyone should.

First of all, once you define your target market, you’ll know exactly where to focus your attentions and resources. You can shape the product concept and even design special features for your target market. You can establish proper pricing. You can determine the need for location of stores or dealers, and you can prepare the most convincing advertising messages.

Even more importantly, by targeting you can concentrate on giving a lot of attention to a smaller, well-selected group rather than paying a little attention to a wider group. Remember what I call the Raspberry Jam Rule - the wider you spread it, the thinner it gets. Don’t spread yourself too thin by trying to reach everybody. The net result will be weakened impact.

Believe it or not, by targeting you can enjoy less competition. It’s the old baseball adage of "hit ‘em where they ain’t." Why choose to play in an already crowded field if you can define a market that will afford you better opportunities? Sam Walton succeeded because he took Wal-Mart to places where no sane competitor would dream of going. He targeted towns that seemed too small to support large discount stores, towns with populations of less than 10,000 people.

Targeting helps you understand your customers’ needs and wants better. At the core of marketing is understanding customer needs and wants, then satisfying them more effectively and more efficiently than your competitors. When a company can better meet the needs and wants of its customers, that success is bound to be reflected in improvements to the bottom line.

Many businesses protest, "Why should we target? We’re profitable." This may be true. Remember though, looking at your bottom line doesn’t tell you if you are meeting customer needs and wants. Furthermore, if you don’t know who your customers are, how can you assess if you are meeting their needs? And for those businesses that are already profitable, think about how much more so they could be by targeting.

As Harvard Business School professor Theodore Levitt said, "The purpose of a business is to get and keep a customer." Targeting can help you do both.

First it helps you retain existing customers. By understanding who they are and what their needs are, you have a better chance of satisfying them. Remember, it costs ten times more to attract a new customer than retain an existing one, so never ignore current customers.

Secondly, careful targeting can bring new customers to your business. Again, by understanding those you already serve well, you can design strategies and promotions to attract more of the same.

Hopefully you are now convinced of the need for target marketing. If, like many other companies, you’ve been spreading your resources too thinly, start your targeting exercise by asking yourself the following questions:

1. "Who are my customers?" This sounds deceptively simple. It’s not. As an example, business travellers make up only 9% of passengers for United Airlines. However, they account for a whopping 45% of revenues. Campbell Soup found that 10% of their customers were responsible for 90% of the products sold. Even if you think you know who your customers are, answering this question may yield surprising information.

2. "Why do I want them?" You need to understand what makes a customer profitable to you. For some it may be length of term or revenue generated. For others perhaps effort to service or fit with the business are more important. Not all customers are created equal. Would you rather be a supplier to KMart or WalMart?

3. Define the customers you want to attract and those you do not. A local Internet provider promised unlimited technical support thinking it would attract more business to the company. It did. Unfortunately, the target market who found this promise appealing ended up using far more technical support than anticipated. The target group turned out to be unprofitable and a burden on company resources.

4. When target marketing, think about your business as being an ideal client magnet. Now ask yourself, "What am I doing to attract these clients to my business?" Then concentrate on understanding the needs and wants of your ideal clients and focus your resources here.

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