Small Business Usage of Target Marketing
Peterson, Robin T., Journal of Small Business Management
SMALL BUSINESS USAGE OF TARGET MARKETING
Target marketing, which has been adopted by a number of large producers, wholesalers, service institutions, and retailers in the United States, involves three basic steps. The first is market segmentation, where the total market is subdivided into distinct groups of buyers who might respond to separate products or marketing mixes. This has been described as a condition where "Heterogeneity in demand functions exists such that market demand can be disaggregated into segments with distinct demand functions" (Dickson and Ginter 1987). Then, each market segment is evaluated to determine its potential, and one or more of the segments are selected for penetration. Finally management designs a detailed marketing mix to appeal to the segment(s) chosen (Kotler and Armstrong 1990).
Increasingly, firms are discovering target marketing's potential for success. Particular classes of customers are targeted in an attempt to effectively satisfy their distinct needs, as opposed to attempting to appeal to the mass market through a compromise strategy. When target marketing is well-conceived, it can produce strong customer satisfaction and brand loyalty and give firms an edge against rivals. Many successful firms, including DuPont, RJR Nabisco, General Mills, and WalMart, have found this an effective strategy. In fact, most markets have become so fragmented that selling to the mass market is no longer feasible.
The value of target marketing is enhanced because identified market segments in one geographic location are often generalizable to other locales. One study discovered generalizable segments in 12 states that are in different regions of the United States (Lesser and Hughes 1990). Another study demonstrated that segments with similar attitudes and behavior can exist across international boundaries--in this case the United States, the Netherlands, France, and Norway (Bronislaw, Dahringer, and Cundiff 1989).
Because of the success of target marketing by larger enterprises, logic suggests that it would also be a popular strategy of small companies. But only limited evidence in the literature addresses the degree of target marketing by small firms. Also not available in the literature are data indicating how small firms employ target marketing. This article is based on a study that was designed to fill these voids.
The literature contains many studies relating to target marketing and market segmentation in a wide array of industries. A sample that illustrates the wide applicability of these techniques is examined here. For instance, the passenger airline industry has been the subject of considerable research into market segmentation, and findings suggest that personality, environmental, and demographic variables are useful for subdividing the market. According to one study, different segments of airline passengers have distinct consumer preferences regarding convenience, economy, and safety (Bruning, Kovacic, and Oberdick 1985).
Another industry where target marketing has been widely employed is the restaurant industry, which includes many small businesses. One study indicated considerable differences from one market segment to another in the basic desire for certain food attributes, such as nutrition and taste. Based upon the finding, the authors indicated that target marketing strategies had considerable potential in that industry (Bahn and Granzin 1985). In addition, researchers also have identified segments of health care consumers that differ considerably in the type and extent of health care benefits and facilities they prefer and utilize (Bonaguro and Miaoulis 1983).
Studies of target marketing have not been restricted to profit-seeking organizations, and the strategy has been shown to be useful for fund raising. Various segments have different reasons for donating (or not donating) funds or volunteer hours, so appeals for funds and volunteer recruitment efforts can be tailored to meet the needs of each segment (Harvey 1990, Yavas and Riecken 1985). …