Before businessmen decide where to export their products they must carefully analyze the features of the possible places to sell their merchandise. A large market, for example, may seem very attractive at first due to the amount of potential consumers, but it may end up meaning bad business if the population does not have sufficient consumption capacity. Or maybe a market with many consumers results a poor option for a businessman if social habits prompt consumers to use other products. In order to avoid these mishaps, businessmen must carry out what is called a “target market analysis.”  

A document by the Inter-American Investment Corporation (IIC) explains that a proper target market analysis should follow a strategy known as “STP”, for the first letters of the three main elements that should be taken into account: Segmentation, Target and Positioning. 

Segmentation

The first step in the analysis consists of breaking up the market into small and uniform groups, so as to be able to works with them property. According to IIC, they must meet four requirements: first, they should be definable (they should have certain common features); they must be reachable (they must form part of the market); third, they must be homogeneous (its elements should not fully differ); and finally, they must be profitable (at first sight, they must be considered possible targets for the company).  

It is not just about selling, but selling through the most appropriate channel in order to reach the optimal final customer and in the most efficient manner

This process will result in “segments”, which are small markets, in geographic terms as well as in regard to distribution and consumption. A segment can be based on consumption capacity, habits and level of education, among many other social factors.

Depending on how profitable the segments, some may constitute “market niches”. These “niches” constitute segments where the businessman has significant opportunities to enter the market and compete with the possibility of obtaining good results.

Target

The second step of the analysis consists of considering to which segment the businessman wishes to offer its products; in other words, which is the target segment? For example, the product can be aimed towards a group with high purchasing power or to one with less consumption capacity but more massive.  Or the target can be a segment in a specific geographic location or an environment with certain specific consumption patterns.

In this regard, the businessman must also consider the features of the public belonging to these segments; what the individuals that make up each of these groups are like.  

Positioning

The third step is to study how the product can be positioned in this context. What experience do we wish to offer our consumers? What benefits does our product offer compared to others? Who is the competition and how do we want to position ourselves in the market with respect to same?   

The IIC explains in detail the importance of positioning the product and differentiating it from the competition:   “It is not only about selling, but selling through the most appropriate channel in order to reach the optimal final customer and in the most efficient manner. It is important to take into account that this is not only a way of achieving the best economic profit but a necessary condition for remaining in the market over the medium term.   Introducing a product or service normally requires displacing another that is already present in the channel that is why it is essential for both the distributor and the consumer to adequately understand and assess the advantages".