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Defining Your Market

Mon, 29 July 2002

Many businesses define their market by looking at the product or service they are providing; that is, they are product-led.
Whilst sometimes that can be effective, in most cases businesses need to be market-led: they should be looking at, and planning, everything from the viewpoint of the customer, identifying what needs customers are seeking to fulfil when they buy a particular product or service.

Defining your market

The ideal starting point is to define quite precisely the market that you are targeting. For example, a small off-licence may only service the needs of a few dozen streets, whereas a specialist restaurant will have to call on a much larger catchment area to be viable. In what market is, say, Parker Pens? They see themselves in the gift business - so they compete against the likes of Ronson lighters, not BiC biros.
  • You may eventually decide to sell to different markets. For example: a retail business could service a local area through the shop and a national area by mail order. A small manufacturing business could branch out into exporting.
  • People often flounder in initial market research by describing their markets too broadly. For example, saying that they are in the motor industry when they really mean second-hand car sales in Gateshead.
  • It may help you to think about your market by using a technique called market segmentation. Start with the big picture and break it into logical segments that differ, for example, buying habits, buying ability, location, etc.


The Burton Group originally manufactured and sold men’s suits through a chain of stores. But in the early 1980s, they started to think carefully about the market and began to segment it by age of purchaser, style, cost, etc, and then concentrated on offering well designed, value for money clothes which they marketed carefully. This was so successful that they eventually stopped manufacturing themselves and now sub-contract it all.

The way they have segmented the market for womenswear is shown in the figure. Apart from Debenhams, a department store, all their shops are focused at a specific, single gender market.You too should segment your market. You do not have to sell to more than one segment, but the process can help you to define your customers more accurately.

Segmenting your market 

Segmenting the market helps you to understand market composition, interpret and present statistical information and target the customers most likely to buy your products. The information you collect can be used in designing effective advertising, deciding on a suitable pricing structure, providing the right products, knowing the best location, and so on. It will help you to make informed decisions. Usually customers can be profiled by criteria such as age, occupation, home ownership, etc. For example, imagine your product is a luxury item, which can only be afforded by certain income groups. Of these, you are only able to supply people in your immediate area. Of these, female homemakers are the main purchasers. They must be able to drive, aged between 20 and 30 and have no children. It is not long before you have defined a quite precise group for whom a wide range of information is available.
Careful segmentation will help you define your market accurately. But segmentation alone is not enough for a business to be successful. Businesses must offer a top quality product or service; they must differentiate themselves from their competitors; and, most importantly, they must closely match their product or service to the specific needs of their customers.
You will need to decide how to reach your customers, through advertising, point of sale material, etc. This should all be set out in a marketing plan.

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