How Can Concentrated Marketers Grow ?

Ways Firms Pursuing a Concentrated Targeting Strategy Can Grow

There is a misconception that concentrated marketing will limit growth. However, while the set of consumers targeted is limited to a single target market, that does not restrict growth opportunities for the firm.

A concentrated marketer can grow through:

• Geographic Expansion
• Broadening the Product Range
• Increasing Product Variety
• Deepening Customer Engagement
• Leveraging Technology
• Partnerships and Collaborations
• Increasing Share-of-Wallet
• Expanding into Adjacent Niches
• Innovation and R&D
• Premiumization

1. Growth by Introducing New Products

Let’s look at an example of firm that markets hiking and camping equipment, such as tents and protective clothing. They have adopted a concentrated marketing strategy and pursue a defined target market of regular hikers and campers (those who hike and camp on a regular basis, as opposed to a casual bushwalker).

In terms of growing through product development, they could introduce new products such as:

• hiking shoes
• easy-to-carry cooking equipment
• communication devices, such as satellite radios
• easy-to-carry, non-perishable food
• vitamins and energy bars and beverages
• videos, books, and online courses for serious campers and hikers
• information sessions and online communities, addressing common Q&A’s
• drones, cameras, binoculars
• various forms of safety equipment and first-aid kits
• and so on

As you can see, although the business has a defined target market, which in this case has been defined using a psychographic variable of activity = hiking and camping, there is a wide variety of new products they could introduce to their customers.

As they build stronger relationships with their target market, they will become the “go to” brand/firm for anything related to camping and hiking for their customers.

This creates a strong brand, clear positioning, stability of cash flow, ability to charge a price premium, and a strong barrier to potential new competitors.

2. Growth Through Market Development

Another potential way that they could easily expand their business is through market development. With this approach, they could continue with the same defined target market and then select and enter international markets that have a high proportion of the same type of consumer segment.

In this way, they have maintained their target market and have continued to use a concentrated target market strategy but continue to expand their offerings and reach a greater proportion of their targeted consumers.

Another example here would be the coffee chain Starbucks, who targets people who enjoy premium coffee in a relaxing and friendly environment.

They pursue a single target market, making them a concentrated marketer, but expand their operations by pursuing market development through more locations and expanding into 100’s countries, and by introducing complementary products such as snacks and cakes.

3. Growth by Using Product-variety Marketing

For this example, let’s assume that a company is concentrating on providing healthy food and snacks for children (that is their only target market).

One way that they could grow would be to produce their products in an array of:

• different packaging (for convenience and/or fun)
• in different flavors
• different serving sizes
• different quality levels (high or low quality)
• and so on

This introduces variety and choice which is important in the food and snack market.

They could also integrate elements of fun in the packaging, brand-name, shapes and design of the snacks themselves, and even augment the product with online access to games and other activities designed for children.

Obviously, these tactics will enhance their market share because they provide the variety and choice, but it will also help build their brand, customer loyalty, customer engagement, and a strong clarity of their positioning.

All of these tactics create a very stable and long-term level of profits, as their market share becomes more protected, and there is an ability to charge a price premium.

4. Growth by Deepening Customer Engagement

• Loyalty Programs: Rewarding repeat customers to increase retention and lifetime value.
• Community Building: Creating events, forums, or social media groups to foster a sense of belonging among customers.
• Value-Added Services: Offering services like workshops, consultations, or memberships to deepen relationships with the target market.

Example: A photography equipment retailer could host photography workshops or offer subscription-based equipment rentals.

5. Growth by Leveraging Technology

• E-commerce Platforms: Expanding digital presence to make products accessible globally.
• Data-Driven Insights: Using analytics to better understand consumer behavior and optimize offerings.
• Digital Marketing: Leveraging targeted ads, email campaigns, and influencer partnerships to expand reach within the target market.

Example: A boutique fitness studio could use an app to offer on-demand classes to customers worldwide.

6. Growth by Partnerships and Collaborations

• Co-Branding: Collaborating with brands that share similar values or cater to overlapping audiences.
• Strategic Alliances: Partnering with other businesses to enhance distribution, reach, or product offerings.
• Influencer Marketing: Collaborating with influential figures within the target segment to increase brand visibility.

Example: A sustainable fashion brand might collaborate with eco-friendly travel companies to co-market products.

7. Growth by Increasing Share-of-Wallet

• Upselling: Encouraging customers to purchase higher-value versions of the product.
• Cross-Selling: Promoting related products or services to existing customers.
• Subscription Models: Introducing recurring purchase options, such as monthly boxes or memberships.

Example: A meal kit service could upsell premium meal options or add-on products like specialty sauces.

8. Growth by Expanding into Adjacent Niches

• Serving Overlapping Needs: Identifying similar consumer groups within the same niche and tailoring offerings slightly to serve them.
• Diversifying Use Cases: Marketing the product for additional applications relevant to the target market.

Example: A company specializing in ergonomic office chairs might expand into ergonomic standing desks.

9. Growth by Innovation and R&D

• Developing New Solutions: Continuously innovating to create products that address evolving consumer needs.
• Sustainability Initiatives: Introducing eco-friendly or socially responsible practices to appeal to conscious consumers.

Example: A pet food company could develop innovative products like insect-based protein options for environmentally conscious pet owners.

10. Growth by Premiumization

• Creating High-End Offerings: Introducing luxury versions of existing products to cater to affluent members of the target market.
• Exclusive Services: Offering VIP experiences or services for top-tier customers.

Example: A fitness apparel brand could launch a premium collection with advanced performance fabrics and higher price points.

Long-Term Viability: When and How Transition from Concentrated to Differentiated 

Concentrated marketing can serve as a highly effective strategy for firms in certain stages of their lifecycle or for specific industries. However, assessing its long-term viability requires careful analysis of internal and external factors.

When to Consider Transitioning

1. Market Saturation:
   • If the chosen target market becomes saturated, growth potential diminishes, signaling the need to explore additional segments or strategies.
   • For example, a boutique coffee shop catering to local customers may need to expand geographically or target new demographics as local demand peaks.
2. Changing Market Conditions:
   • Shifts in consumer preferences, technological advances, or regulatory changes may reduce the attractiveness of the concentrated segment.
   • Firms must reassess whether their offerings remain relevant or if diversifying into new segments is necessary.
3. Competitive Pressures:
   • Increased competition within the focused niche may force a firm to diversify its market base or enhance its product portfolio to maintain profitability.
4. Resource Growth:
   • As businesses grow and resources (financial, operational, and human) increase, they may be better positioned to target multiple segments effectively, transitioning to a differentiated marketing strategy.
5. Risk Mitigation:
   • Relying on a single segment makes the firm vulnerable to economic downturns or market shifts. Expanding into other segments helps distribute risk and stabilize revenue streams.

How to Transition

• Conduct Market Research: Identify attractive new segments based on profitability, competitive intensity, and alignment with the firm’s capabilities.
• Develop Adaptable Offerings: Create products or services that appeal to new segments while leveraging existing expertise and resources.
• Leverage Core Strengths: Use the brand equity, customer relationships, and efficiencies built within the concentrated segment to gain a foothold in new markets.
• Gradual Expansion: Transition incrementally by testing new segments before fully committing resources, minimizing risk.

Target Market Refinement: Staying Relevant Over Time

Refining the understanding of a target market is essential for firms using a concentrated marketing strategy to ensure long-term success. Consumer needs, behaviors, and preferences are not static, and firms must evolve to maintain relevance.

Strategies for Refinement

1. Continuous Market Research:
   • Conduct regular surveys, focus groups, and trend analyses to stay attuned to changes in consumer preferences.
   • Monitor shifts in demographics, income levels, and lifestyle trends that could impact the segment’s needs.
2. Data-Driven Insights:
   • Use customer relationship management (CRM) systems, analytics, and purchase data to track behavior patterns and preferences.
   • Employ predictive modeling to anticipate future needs and proactively adapt offerings.
3. Feedback Loops:
   • Engage with customers through reviews, social media interactions, and feedback programs to understand evolving expectations.
   • Foster two-way communication to build stronger relationships and gather actionable insights.
4. Product and Service Evolution:
   • Regularly innovate and update the product or service portfolio to align with the changing preferences of the target market.
   • For example, a vegan bakery could introduce gluten-free options as dietary trends shift.
5. Competitor Monitoring:
   • Keep a close watch on competitors to identify how they are addressing the same market. Analyze their successes and failures to refine strategies.
6. Cultural and Macroenvironmental Adaptations:
   • Adapt to cultural trends, technological advancements, and macroeconomic changes that influence the target market’s behavior.
   • For instance, incorporating sustainability practices might appeal to eco-conscious consumers within a niche.
7. Segmentation Within the Segment:
   • Divide the target market into micro-segments to identify specific sub-groups with unique needs and refine the offering accordingly.
   • For example, a fitness brand targeting yoga enthusiasts might identify sub-segments like beginners, advanced practitioners, and instructors.

Conclusion

Assessing long-term viability and refining the understanding of the target market are critical for firms using concentrated marketing. While transitioning to differentiated strategies may be necessary for sustained growth, refining the approach within the existing segment ensures the firm remains competitive and relevant in its chosen niche. These strategies collectively help firms balance focus with flexibility, enabling them to adapt to dynamic market conditions.

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Differentiated or Concentrated Marketing?

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