How do you evaluate Targeting Strategy in a business strategy?

How to evaluate it

A target choice is sound when the firm can answer: Who exactly is the customer? Why will they choose us over the next-best alternative? What capabilities give us a defensible edge in serving them? What will we deliberately NOT do for non-target customers?

What we are evaluating

Targeting is the second step of STP — after segmenting the market, the firm chooses which segments it will actively serve. The targeting decision allocates finite marketing resources to the segments where the firm has the highest probability of profitable advantage.

The benchmark framework

Three classic targeting postures exist. Undifferentiated (mass) marketing ignores segment differences and offers one product to the whole market — efficient but vulnerable to focused competitors. Differentiated marketing develops separate offers for several segments, raising costs but capturing more demand. Concentrated (niche) marketing picks one or two segments and dominates them. Beyond posture, target attractiveness is judged by segment size and growth, structural attractiveness (using a Five Forces lens at the segment level), and fit with the firm's objectives and capabilities.

An evaluation walk-through

A premium fitness apparel brand might segment the activewear market into competitive athletes, fitness enthusiasts, athleisure wearers, and value buyers. A concentrated targeting choice — focusing on competitive athletes — lets the brand command premium pricing, build deep technical credibility, and resist pressure from mass-market competitors.

Failure modes to flag

Targeting too many segments early starves each one of resources and dilutes the brand position. Conversely, picking a target purely on size — without checking whether the firm has any right to win — leads to expensive failed launches. Beware target segments that are accessible but already saturated by an entrenched leader.

Source basis: Open Textbook Library: READ MORE