What is Target Markets?

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A target market is a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics, such as age, income, and lifestyle.Identifying the target market is a key part of the decision-making process when a company designs, packages, and advertises its product.

Definition

A target market is a group of potential customers identified as the most likely consumers of a product, characterized by shared traits such as age, income, and lifestyle. Identifying the target market is a crucial part of a company's decision-making process when designing, packaging, and advertising products.

Origin

The concept of a target market originated in early 20th-century marketing theories when businesses began to realize that different consumer groups had varying needs and preferences. As market competition intensified, companies recognized the importance of segmenting markets to more effectively meet the needs of specific consumer groups.

Categories and Features

Target markets can be classified based on various criteria, including geographic, demographic, psychographic, and behavioral characteristics. Geographic segmentation considers the location of consumers; demographic segmentation focuses on age, gender, income, etc.; psychographic segmentation analyzes lifestyle and personality; behavioral segmentation is based on purchasing behavior and usage habits. Each segmentation method has its unique application scenarios and advantages, such as geographic segmentation being suitable for regional products, while psychographic segmentation aids in brand positioning.

Case Studies

A typical example is Nike. Nike successfully targets young, active, health-conscious, and fashion-forward consumers through psychographic and behavioral segmentation. By sponsoring sports events and collaborating with athletes, Nike effectively attracts this target market. Another example is Starbucks, which targets urban middle-class and young professionals through demographic and psychographic segmentation, offering a high-quality coffee experience and a comfortable social environment.

Common Issues

Common issues investors face when applying the target market concept include overly narrow market positioning, which may lead to insufficient potential customer base, and improper market segmentation, which can result in resource wastage. To avoid these issues, companies need to conduct detailed market research and analysis to ensure that the target market selection is based on reliable data and insights.

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A chi-square (χ2) statistic is a test that measures how a model compares to actual observed data. The data used in calculating a chi-square statistic must be random, raw, mutually exclusive, drawn from independent variables, and drawn from a large enough sample. For example, the results of tossing a fair coin meet these criteria.Chi-square tests are often used to test hypotheses. The chi-square statistic compares the size of any discrepancies between the expected results and the actual results, given the size of the sample and the number of variables in the relationship.For these tests, degrees of freedom are used to determine if a certain null hypothesis can be rejected based on the total number of variables and samples within the experiment. As with any statistic, the larger the sample size, the more reliable the results.

Chi-Square Statistic

A chi-square (χ2) statistic is a test that measures how a model compares to actual observed data. The data used in calculating a chi-square statistic must be random, raw, mutually exclusive, drawn from independent variables, and drawn from a large enough sample. For example, the results of tossing a fair coin meet these criteria.Chi-square tests are often used to test hypotheses. The chi-square statistic compares the size of any discrepancies between the expected results and the actual results, given the size of the sample and the number of variables in the relationship.For these tests, degrees of freedom are used to determine if a certain null hypothesis can be rejected based on the total number of variables and samples within the experiment. As with any statistic, the larger the sample size, the more reliable the results.

A rival good is a product or service that can only be consumed by one user or a limited number of users. The rivalry is among consumers, whose competition to obtain the good can create demand and drive up its price. A non-rival good, on the other hand, can be used simultaneously by many consumers.Most common household products and supermarket foods are rival goods. A bar of soap or a bottle of beer can only be consumed by a single person. If the product is in short supply, the rivalry among consumers is intensified. A limited-edition designer t-shirt is a rival good that may increase in price simply because demand outweighs supply.A non-rival good may be consumed by many people at the same time without any pressure on its supply. Streaming videos are an example.

Rival Good

A rival good is a product or service that can only be consumed by one user or a limited number of users. The rivalry is among consumers, whose competition to obtain the good can create demand and drive up its price. A non-rival good, on the other hand, can be used simultaneously by many consumers.Most common household products and supermarket foods are rival goods. A bar of soap or a bottle of beer can only be consumed by a single person. If the product is in short supply, the rivalry among consumers is intensified. A limited-edition designer t-shirt is a rival good that may increase in price simply because demand outweighs supply.A non-rival good may be consumed by many people at the same time without any pressure on its supply. Streaming videos are an example.

An education IRA is a tax-advantaged investment account for higher education, now more formally known as a Coverdell Education Savings Account (ESA). Under this educational savings vehicle, parents and guardians are allowed to make nondeductible contributions to an education individual retirement account (IRA) for a child under the age of 18.

Education IRA

An education IRA is a tax-advantaged investment account for higher education, now more formally known as a Coverdell Education Savings Account (ESA). Under this educational savings vehicle, parents and guardians are allowed to make nondeductible contributions to an education individual retirement account (IRA) for a child under the age of 18.

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Vendor Financing

Vendor financing is a financial term that describes the lending of money by a vendor to a customer who uses that capital to purchase that specific vendor's product or service offerings.Sometimes called "trade credit," vendor financing usually takes the form of deferred loans from the vendor. It may also include a transfer of stock shares from the borrowing company to the vendor. Such loans typically carry higher interest rates than those associated with traditional bank loans.

A vendor note is a short-term loan a vendor makes to a customer that is secured by goods the customer buys from the vendor. A vendor note is classified as a form of "vendor finance" or "vendor financing," which is a type of lending that usually takes the form of a deferred loan made by a vendor. Vendor notes are most likely to be employed when a vendor has more confidence in a customer's business prospects than a traditional lender (a bank) would.

Vendor Note

A vendor note is a short-term loan a vendor makes to a customer that is secured by goods the customer buys from the vendor. A vendor note is classified as a form of "vendor finance" or "vendor financing," which is a type of lending that usually takes the form of a deferred loan made by a vendor. Vendor notes are most likely to be employed when a vendor has more confidence in a customer's business prospects than a traditional lender (a bank) would.

Supply Chain Finance

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Supply Chain Finance

Supply chain finance (SCF) is a term describing a set of technology-based solutions that aim to lower financing costs and improve business efficiency for buyers and sellers linked in a sales transaction. SCF methodologies work by automating transactions and tracking invoice approval and settlement processes, from initiation to completion. Under this paradigm, buyers agree to approve their suppliers' invoices for financing by a bank or other outside financier--often referred to as "factors." And by providing short-term credit that optimizes working capital and provides liquidity to both parties, SCF offers distinct advantages to all participants. While suppliers gain quicker access to money they are owed, buyers get more time to pay off their balances. On either side of the equation, the parties can use the cash on hand for other projects to keep their respective operations running smoothy.