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1. Design your BLT sandwich and determine who would want to eat your BLT sandwich (your target market). Feel free to add a theme to your sandwich too!
2. List all the ingredients to your BLT and look up the price of all the ingredients. You can use the web or go to the grocery store to find the prices.
3. Input the prices into Excel and create a table. Calculate the cost (AVC) of making your sandwich (if you need help, refer back to Implicit and Explicit Costs).
4. Decide on the price you would sell this sandwich for. Would any side be included with it? What type of restaurant would your sandwich be sold at.

What Is a Target Market?

A target market is a group of people with some shared characteristics that a company has identified as potential customers for its products. Identifying the target market informs the decision-making process as a company designs, packages, and markets its product.

A target market may be broadly categorized by age range, location, income, and lifestyle. Many other demographics may be considered. Their stage of life, their hobbies, interests, and careers, all may be considered.

Understanding Target Markets

Few products today are designed to appeal to absolutely everyone. The Aveda Rosemary Mint Bath Bar, available for $20 a bar at Aveda beauty stores, is marketed to the upscale and eco-conscious woman who will pay extra for quality.1 Cle de Peau Beaute Synactif Soap retails for $110 a bar and is marketed to wealthy, fashion-conscious women who are willing to pay a premium for a luxury product.2 An eight-pack of Dial soap costs less than $4.50 on Amazon, and it is known to get the job done.3

Part of the success of selling a good or service is knowing to whom it will appeal and who will ultimately buy it. Its user base can grow over time through additional marketing, advertising, and word of mouth.

That's why businesses spend a lot of time and money to define their initial target markets, and why they follow through with special offers, social media campaigns, and specialized advertising.

Segmenting the Market

Dividing a target market into various segments is as simple as dividing the population into groups that can be measured by key characteristics. These include gender, age, income level, race, education, religion, marital status, and geographic location.

Consumers with the same demographics tend to value the same products and services, which is why narrowing down the segments is one of the most important factors to determine target markets.

For example, people who fall into a higher income bracket may be more likely to buy specialty coffee from Starbucks instead of Dunkin' Donuts. The parent companies of both of these brands need to know that in order to decide where to locate their stores and where to stock their products.

Target Market and Product Sales

Identifying the target market is an essential part of a product development plan, along with manufacturing, distribution, price, and promotion planning. The target market determines significant factors about the product itself. A company may tweak certain aspects of a product, such as the amount of sugar in a soft drink, so that it appeals more to consumers in its target group.

As a companys product sales grow, it may expand its target market internationally. The international expansion allows a company to reach a broader subset of its target market in other regions of the world.

In addition to international expansion, a company may find its domestic target market expands as its products gain more traction in the marketplace. Expanding a product's target market is a revenue opportunity worth pursuing.

How Detailed Should a Target Market Be?

It depends. Broadly speaking, a product may be designed for a mass market or a niche market, and a niche market can be a very small group indeed, especially in its early introductory phase.

Most carbonated beverages may aim for a practically universal market. Coca-Cola had to branch out to 200 markets abroad to grow its customer base.5 Gatorade is owned by Pepsi Cola, but this brand is positioned as a drink for athletes.6 The soda brand Poppi, which is branded as a "Healthy, Sparkling, Prebiotic Soda with Real Fruit Juice, Gut Health, and Immunity Benefits," is clearly aimed at a younger, healthier, and more trend-conscious target market.7

What Is an Example of a Target Market?

Consider a casual apparel company that is working to build its distribution channels abroad. In order to determine where its apparel will be most successful, it conducts some research to identify its primary target market. It discovers that the people most likely to buy their products are women between the ages of 35 and 55 who live in Switzerland.

It's only logical for the company to focus its advertising efforts on Switzerland-based websites that appeal to women.

But first, the company may consider how its apparel can be most attractive to that target market. It may revise its styles and colors and tweak its advertising strategy to optimize its appeal to this new prospective market.

What Is the Purpose of a Target Market?

A target market defines a product as well as vice versa.

Once a target market is identified, it can affect a product's design, packaging, price, promotion, and distribution.

A product aimed at men won't be packaged in pink plastic. A luxury cosmetic won't be sold at a pharmacy. An expensive pair of shoes comes with a branded cloth drawstring bag as well as a shoebox. All of those factors are signals to the target audience that they have found the right product.

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