In this lesson, we’ll learn about:
As the lesson introduction says, a ‘market’ can be defined as a place where an enterprise sells its products or services. We need to choose the market we operate in. Are we going to sell our products to other businesses or straight to the consumer? Are we going to sell our product to the majority of customers out there or a specific type of customer?
The answer to this might not be clear cut of course. We might want to sell to other businesses AND direct to consumers. However, which of these markets you do choose will have an effect on how you sell and market your products.
A Business to Business (B2B) market is where one business sells its goods and services to another business. An example of this might be an automobile manufacturer will purchase parts such as tyres, batteries & electronics from another independent company to build the cars they sell. Another example would be where supermarkets will get most of their grocery supplies from wholesalers.
A Business to Consumer (B2C) market is where a business sells directly to the end consumers. An example of this might be a fast-food chain like McDonald’s selling burgers directly to customers. Another example would be Nike selling their trainers directly to consumers via their website as well as physical Nike stores.
Neither of these markets is better than the other, and many businesses will operate in both, however, there are differences between how we market & sell to these markets. B2B sales tend to be more process-driven and so will often involve more steps involved with completing a sale. However, B2B sales tend to be more valuable than B2C sales and with B2B sales, repeat business is usually much higher.
A niche market is a section (or segment) of a larger market that has its own unique needs, preferences, or identity that makes it different from the larger market. For example, within the tea market, there are many different niches such as herbal tea, decaffeinated tea, etc. Another example is within the smartphone market, where we can see niches like budget phones & gaming phones.
Mass market refers to a large, undifferentiated market of consumers, even though they might have widely varied backgrounds. This includes all those products and services needed by almost every member of society. For example, paper towels, toilet paper, petrol and electricity & gas utilities.
The obvious benefit of operating within a mass market is that there is a huge number of customers that you can sell to. This can mean potentially much higher turnover and profit. However, mass markets are typically extremely competitive, while niche markets will have less competition and so give you greater scope to establish yourself in the market.
Think of a mass market and then try to identify all of the niches within that market. For example, what niches are there in the toothpaste market?
Your ‘target market’ can be defined as the market an enterprise wants to sell its products to. Obviously, we’ve looked at types of markets like B2B & B2C. However, a target market is usually more focused on a specific set of people.
The target market is really groups of consumers whom a product or service is specifically aimed at. For example, a children’s toy will have ‘children of a certain age’ as its target market. So, a targeted market is people or businesses:
Identifying your target market is very important to all businesses. It helps the company to:
Being able to identify your target market requires an understanding of ‘market segmentation’. We’ll learn more about this next lesson.
Choose any business you purchase products from regularly. What would you say is their “target market”? Do you think that you represent the type of customer they specifically target?
So to summarise what we’ve learnt in this lesson: