Suppose you have an intriguing product to offer, a hardworking and resilient team of employees, efficient suppliers, but you have not targeted a particular segment of the market effectively. Will you be successful? NO.
A successfully running export business has its perks and benefits such as an increase in opportunities, cultural diversity, learning new skills, and less dependency on a domestic market etc.
But there are many challenges such as risks, trade barriers, cultural differences, and the risk of entering a wrong target market because of inadequate research.
The target market refers to the groups of potential customers who are most likely to avail of the product or service provided by the brand. When a business comes up with a product, they assess the people who will use that product and then group all those customers who may have something in common into a target market.
Taking the example of Apple Inc, for instance, it is a technology company like many others that are operating, but Apple Inc has targeted the elite society by setting higher prices than the competitors. The market sums up all the people who use gadgets, but Apple has targeted a particular segment only.
Choosing the right target market is significantly important and has many benefits. Many times businesses follow all the protocols that a business needs to follow and make sure that their product stands out, but they end up advertising it to the wrong segments of the population resulting in less than anticipated sales.
Selecting the right target market also helps reduce the cost of advertising for the business and allows keeping competitive prices based on what a particular target market can pay.
Similarly, the inability to decide on the right target market may result in increased advertising and marketing expenses, low sales and sales revenue.
It is excruciatingly important that exporters decide the right target market so that all the efforts they put into entering a market do not go down the drain, and the hassle can be worth it.
Here’s how export businesses can decide a target market
When selecting a market to target and penetrate, there are several things to consider before making the final decision. The first step is to analyze the product’s characteristics. This includes the nature of the product, cost, price etc. In terms of exporting, businesses also find the need to assess whether their offering is going to fill a market gap by offering something unique or not.
Customer demographic data
Once product analysis has been carried out, the next step is to extract demographic data of the country where one intends to export. In this step businesses should track down income levels, age, social class, race etc.
This would help in assessing all the potential customers in the host country that the business will have to cater, and provide a unique value to them.
Most importantly, a business must assess if the decision to target a market is aligned with its goals and objectives or not. It involves comparing the risk of the investment with the expected return and to analyze if their products are going to fill any market gap.
Macro economic factors
The macro economic factors of a country include GDP, per capita income, employment level. It is significantly important to analyze these factors to know whether the customers will be able to afford an imported good or not; therefore, target market for exporting should be selected after reviewing the income level or stability of the country.
If a business is exporting a high-end product that is meant to target the elite class of the society, the business will witness better sales in a developed country where per capita income is high.
Steer clear of competition! Competition can be a motivator to perform better than others in the industry but way too much competition can be daunting.
Exporters should analyze their competitive advantages and other value maximizing factors that would set them aside while deciding on a target market in a country.
Barriers to trade
The final decision of selecting a target market in a country one wants to export goods to should be made keeping the trade barriers in mind. Tariffs are a form of taxes that are levied on exports and imports. These additional charges may increase the product cost resulting in higher prices.
Deciding a target market is not as complicated for domestic enterprises but exported have to keep these additional factors in mind before making the final decision.
Logistics / Transportation
The attractiveness of a target market is amplified due to the transportation and logistics because it can impact the costs of a product. Shipment expenses ultimately result in increased prices which may impact sales of an exporter’s merchandise negatively.
Also, the easier and hassle free the flow of goods from one country to another is the better.
In a nutshell, the process of deciding on a target market for your export business does not only rely on the likes and preferences of the potential customers, but also the external stimuli that the customers may respond to.
Moreover, the final word also depends on the attractiveness of a market such as the easiness of doing business, reduced costs and barriers, adequate per capita income etc.
After considering all of the factors mentioned above businesses could easily select a suitable country for export and segment the population based on demographic characteristics and target a market out of those segments.