Target Market in a Nutshell
A target market is the specific group of customers a business aims to sell to, chosen because they are most likely to buy. The business shapes its product, price, promotion and place around them, which saves money and wins loyalty but can limit sales and invite competitors.
Target Market Definition
A trainer company spends £2 million on a TV advert. The advert is funny and well made. Sales barely move. The problem was not the advert: it was aimed at everyone, so it spoke to no one. This is why examiners love asking about target markets.
A target market is the specific group of customers a business aims to sell to. It is chosen because those customers are most likely to buy. The business then shapes its product, price, promotion and place around them.
Think of Gymshark. It did not try to sell gym wear to every adult in the UK. It aimed at 16 to 30-year-olds who train seriously and spend time on Instagram and YouTube. Every decision followed from that choice, from slim-fit designs to sponsored fitness influencers.
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Target Market Characteristics/Features
- A specific group: the target market is a defined set of customers, not “everyone”.
- Chosen for likelihood to buy: the business selects the customers most likely to respond.
- Described by variables: demographic, geographic, psychographic and behavioural traits.
- Shapes the marketing mix: product, price, promotion and place are built around the group.
- Follows segmentation: the market is split into segments first, then one or more are targeted.
- Can change over time: as tastes, incomes and competitors change, the target may need to move.
Examples of Target Market
Demographic variables are measurable facts about people. Saga sells holidays and insurance only to people over 50, Rolls-Royce Motor Cars targets very wealthy buyers (a new car often costs over £300,000), and Center Parcs builds its breaks around families with young children. Geographic variables describe where customers live: a Cornish pasty shop may target tourists in St Ives in summer, and Greggs places shops near train stations and busy high streets.
Psychographic traits cover lifestyle, values and attitudes. Lush targets shoppers who care about the environment and animal welfare, which is why it sells “naked” products with no packaging. Behavioural traits describe how people buy: Gousto targets busy people who want to cook but lack time to plan meals, and its weekly subscription fits that habit.
Take the UK coffee market. It can be split into commuters wanting speed, students wanting low prices and coffee lovers wanting quality beans. Pret targets commuters near stations, while independent roasters target the quality-focused group. Each business segmented the same market, then targeted a different slice.
Advantages & Disadvantages of Target Market
Advantages
More efficient marketing spend
The business knows where its customers are, so it advertises only on the right channels. Huel targets busy professionals and gym users through podcasts and social media. Less money is wasted on people who will never buy, so marketing costs per sale fall and profit margins rise.
Products better matched to customer needs
Research on a narrow group shows what they truly want. Nintendo’s Switch targeted families and casual gamers with simple, portable play. Customers feel the product was made for them, so sales rise and returns fall.
Higher prices can be charged
A well-defined group will often pay more for a product made for it. Rolls-Royce owners pay for custom colours and hand-stitched seats. Demand is less price elastic, so the business earns higher revenue per unit and stronger profit margins.
Stronger brand loyalty
Customers stay loyal when a brand reflects their values. Lush shoppers return because the brand matches their ethical views. Repeat purchases bring steady, predictable revenue, which makes cash flow forecasting easier.
Clearer competitive advantage
Instead of fighting giants on price, a targeted firm wins a group they ignore. Gymshark avoided competing head-on with Nike in every market. Less direct competition means less pressure to cut prices.
Better business decisions
A clear target guides choices on location, stock and staffing. Greggs opens shops where commuters pass every morning. Fewer poor decisions are made, and resources go where returns are highest, which supports growth.
Disadvantages
Smaller potential sales
Focusing on one group shuts out others. A business selling only to wealthy buyers ignores millions of customers. Total revenue may be capped, which limits economies of scale and keeps unit costs higher.
Over-dependence on one group
If that group changes its habits, sales collapse. Many brands aimed at teenagers on one social platform lose sales when trends shift. Revenue falls quickly and the business may face cash flow problems.
Costly market research
Identifying the right customers takes surveys, data and analysis. A start-up may spend thousands before selling anything. This increases fixed costs at a risky stage, leaving less money for stock or staff.
Risk of choosing the wrong group
Research can be wrong. A firm may target a group that does not want the product. Marketing spend is wasted, unsold stock builds up, and the business may need to rebrand at further cost.
Attracts competition
A profitable target group draws rivals in. Gymshark’s success encouraged many new online gym-wear brands. Market share comes under threat, and the business may cut prices, reducing profit margins.
Vulnerability to economic change
Some groups are hit harder by recessions or rising interest rates. Brands aimed at young renters suffered during the recent cost-of-living squeeze. Disposable income falls and demand drops, so profit falls, especially for non-essential products.
Identifying a Target Market: Variables and Strategy Choices
Businesses describe their target customers using four main types of variable. The more precisely you name the variable, the more marks you earn. “Young people” is vague. “16 to 24-year-olds with low disposable income” earns marks.
- Demographic: age, gender, income, family status.
- Geographic: where customers live, from country and region to climate and town type. Waterproof coats sell better in the Lake District than in sunny regions abroad.
- Psychographic: lifestyle, values and attitudes.
- Behavioural: how often people buy, how loyal they are and whether they hunt for discounts.
Segmentation and targeting are linked but different. Segmentation is dividing a whole market into smaller groups with shared features. Targeting is choosing which of those groups to aim at. A third step is positioning, which is how the business wants its target customers to see the brand. A simple way to remember the order is S-T-P: segment, target, position.
Once segments are known, a business picks a strategy. A niche market is a small, specialised segment, such as left-handed tools or Brompton folding bicycles for city commuters. A mass market is a large market with broad appeal, such as Primark selling low-cost clothing to almost everyone.
| Niche market | Mass market | |
|---|---|---|
| Size | Small | Large |
| Competition | Low | High |
| Price | Often premium | Often low |
| Main risk | Over-reliance on few customers | Price wars |
Some firms move between the two. Brompton began as a niche brand but now sells worldwide. Growth brings revenue but may weaken the exclusive image its customers value.
Common Mistakes
Students often define a target market as “who buys the product” without naming the variables, mix up segmentation and targeting, or describe a target market without explaining how it changes profit, costs or competition.
Memory Trick
S-T-P: Segment, Target, Position. First split the market, then choose a slice, then decide how that slice should see you.
Evaluation link: a perfect target fails if rivals already dominate it, so always comment on competition and on whether the chosen group is growing.
Evaluating the Usefulness of Target Market
Evaluation is AO4. It means reaching a decisive, justified judgement. A summary of points is not a judgement. Is targeting effective? It depends. A strong judgement sounds like this: “Targeting is most effective when the chosen segment is growing and poorly served by rivals. For a small firm with limited finance, a narrow focus is the better option, because it lowers marketing costs per sale.” Always name the single most important factor and say why it outweighs the others.
Competition
If a segment already has strong rivals, a new firm may struggle. Targeting an ignored group, as Gymshark did early on, is more likely to succeed. The fewer close rivals, the stronger the case.
The market
Is the segment growing or shrinking? Plant-based food grew fast in the late 2010s, then slowed. A firm targeting a shrinking group faces falling sales however well it markets.
The objective
A firm seeking rapid growth may prefer a mass market. A firm seeking high margins and brand prestige may prefer a niche. Rolls-Royce would damage its brand by selling cheap models.
The situation
A start-up with little finance may need a narrow target to survive. A large firm like Unilever can target many segments at once with different brands.
Studying and Revising?
Reading through these notes is a solid start, but the real gains come from practising exam-style questions and receiving specific feedback. Most students skip this step because writing answers without marking feels pointless. The AI Business Tutor solves that problem: submit a practice answer, receive feedback broken down by AO1 to AO4, then rewrite and watch your mark improve. You get 3 free credits to start, and lessons and multiple-choice questions are free.
Practice Exam-Style Multiple Choice Questions for Target Market
Q1 Which of the following best describes a target market?
Show the answer
Correct answer: B. A target market is the specific group chosen because they are most likely to buy.
Q2 Greggs placing shops near train stations is an example of targeting using which variable?
Show the answer
Correct answer: A. Location is a geographic variable.
Q3 What is the correct order of the STP model?
Show the answer
Correct answer: B. The market is segmented first, then a segment is targeted, then the brand is positioned.
Q4 Which is a disadvantage of a narrow target market?
Show the answer
Correct answer: B. If the single target group changes its habits, sales can collapse.
Practice GCSE Exam-Style Questions for Target Market with a Case Study
Read the following case study, then answer the questions below.
Case study: Pembrokeshire Paddle Co. Megan Rees runs Pembrokeshire Paddle Co. in Tenby, West Wales. She rents and sells paddleboards. Her target customers are tourists aged 25 to 45 who visit in summer. Last year she earned 80% of her revenue between June and August. Megan spends £400 a month on Instagram adverts aimed at holidaymakers. Many customers leave five-star reviews. But two new rental firms have opened on the same beach. Megan is now considering a second target group: local schools and youth clubs, who would book group lessons from September to May. This would mean buying 15 extra boards at £350 each and training a second instructor.
- Calculate the cost of the 15 extra boards.2 marks
- Explain one benefit to Pembrokeshire Paddle Co. of having a clear target market.3 marks
- Analyse the impact on Pembrokeshire Paddle Co. of relying on summer tourists as its main target customers.6 marks
- Evaluate whether Megan should target local schools and youth clubs. You should use the information provided as well as your knowledge of business.12 marks
Notes on Question 1: 15 × £350 = £5,250.
Notes on Question 4: argue both sides with developed chains. One side: new customers spread revenue across the year, improving cash flow outside summer. The other side: £5,250 on boards plus training raises costs before any revenue arrives. Then judge. Does the new competition on the beach make this move more urgent? That is the depending factor that wins AO4 marks.
Practice A-Level Exam-Style Questions for Target Market with a Case Study
Read the following case study, then answer the questions below.
Case study: Hollow Oak Audio. Hollow Oak Audio is a Sheffield-based firm making premium wireless headphones. Its target customers are music producers and audiophiles aged 25 to 50, with incomes above £45,000. Headphones sell for £420. Revenue last year was £6.8 million, with an operating profit margin of 18%. Growth has slowed. The managing director, Maeve Ashworth, wants to launch a £120 model aimed at students and gamers. A marketing agency predicts this could triple unit sales within three years. However, the cheaper market is dominated by Sony, JBL and Apple. Some loyal customers have posted online that a cheap model would “cheapen the brand”. The launch would cost £1.2 million in design and promotion.
- Calculate Hollow Oak Audio’s operating profit last year.3 marks
- Explain one reason why Hollow Oak Audio can charge a premium price to its current target market.4 marks
- Analyse two risks to Hollow Oak Audio of targeting students and gamers.9 marks
- Analyse how market segmentation could help Hollow Oak Audio decide where to spend its £1.2 million launch budget.9 marks
- To what extent should Hollow Oak Audio move from a niche to a mass market strategy?16 marks
- Evaluate whether a clearly defined target market is the most important factor in the success of a new business.20 marks
Notes on Question 1: 18% of £6.8m = 0.18 × £6,800,000 = £1,224,000.
Notes on Question 5: weigh tripled unit sales against brand damage and fierce price competition. A strong answer might conclude that the move suits Hollow Oak only if it launches under a separate brand name. That protects its premium image, much as Toyota uses Lexus for luxury buyers.
Notes on Question 6: there is no case study. Compare targeting with other success factors: finance, cash flow, product quality and management skill. Use your own examples, such as Gymshark or Brompton. A top-band judgement might argue that targeting matters most early on, but that cash flow decides survival, because many firms with clear targets still fail when they run out of money.
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