What is Target Market Identification?

Target Market Identification
Getty Images / Gary Burchell

Target market identification, by definition, is the method used to sort potential clients for sales and marketing campaigns, advertising and promotions using income, demographic, and lifestyle characteristics of a market and census information. This method is managed in several ways depending on the products and/or services that are the main focus of business. 

How Businesses Identify Target Markets
Target market identification begins with a study of where sales and marketing efforts produce the maximum results.

For example, a law firm mainly offers legal services. However, many law firms specialize in certain types of legal issues. This presents the best picture of target market identification because it specifies where potential clients exist. This is also true for products that are sold to the public. Another example of this is a major food producer of food and beverages. Although the business may have several products, its sales and marketing planning focuses on particular target markets for each product. Thus, they may study target markets for each product in order to finely hone the scope of their target market identification. 

Steps to Identify Target Markets
Generally, most large businesses invest in marketing research consultants to do the work of studying, identifying and creating target markets. In small businesses, marketing research may be done by the business owner or by staff specialists.

In marketing research, there are several elements that comprise the identification of target markets. This include:

  • Defining sources where products and/or services are most likely needed.
  • Researching the volume of products and services sold and used over a broad demographic area.
  • Studying sources of raw materials that are required to produce products or services.
  • Identifying major competitors to determine the location of target markets.

Where Products Are Needed and Used Most
The key to identifying a target market lies with defining specific sources where products and services are most needed and also most used. For example, a business that sells hand tools would identify large residential areas and small repair businesses that are most likely to purchase hand tools. Take notice that grocery stores are located in areas of high visibility, high consumer traffic, and within a short distance from large residential complexes. 

Understanding How Volumes and Quantities Identify Target Markets
To properly identify target markets, it is necessary to perform thorough market research on the volume of products and services sold and used over a broad demographic area. As an example, the marketing research group of a large corporation provides data that provides past, present and future volumes of products and services nationally or, if applicable, internationally. It is important to know the quantities and volumes of goods and services sold to facilitate identifying the most advantageous sales and marketing regions.

Study Sources of Raw Materials and Identify Competitors
When a product-oriented business knows the source of raw materials, they also identify the users of these raw materials.

This is also a way of identifying competitors for market share and those that may represent their greatest competitor for the target markets. 

The Importance of Target Market Identification
Once businesses know the definition of target market identification, the job of market research opens a wider window of opportunity.