Defining Target Markets With Customer Perspectives

David StewartFebruary 1, 20235 min

Brands are defined as much by their market and competitors as their own unique characteristics. Just consider what happened recently to the airline industry where the problems of a single carrier shaded the whole industry. This means building and maintaining a brand must include paying attention to the market as a whole.

There are two ways to define any market. Economists, government agencies, trade organizations and many businesses define markets in terms of suppliers or providers, that is organizations that produce and sell particular products and services. In this way they define “industries”. There is the automobile industry, the telecommunications industry, and the quick service restaurant industry. A provider definition of a market has its uses but is also severely limited as a guide for strategic thinking and brand building. This is simply because it is the customer who buys things that keep industries alive, and the customer very often has a very different perception of the “market” than the producer.

Customers define markets in terms of solutions to problems and satisfiers of needs and wants. In the customers’ world very different products and services, from quite different “industries” may be viewed as substitutes, and the very same product may compete as a substitute in very different markets.  Consumers, including those working in organizational settings, frequently create “home made” products or “kludged fixes.”  Thus, customers often define markets in terms that include non-commercial and apparently noncomparable products, as well as obvious similar competitors.

Consider some examples. Layer cake, premium ice cream, and dessert wines all compete in the consumers’ dessert market. It may well be the case that the competition for a customer’s layer cake purchase is intense, but there is a good chance that many consumers have already decided that ice cream is the better choice for a particular occasion. Jell-O gelatin also competes in the dessert market, but likely does so on very different occasions than layer cake and ice cream. On the other hand, gelatin can also provide a foundation for a very nice fruit salad. When the customer picks up a box of gelatin in the store they may be buying in the dessert market, they may be purchasing in the salad market, or they may be buying an after-school snack for kids.

Then there is the case of the transportation industry. Increasingly airlines compete with the telecommunication industry, especially in a world disrupted by COVID. The relevant market for many business people is the “meeting” market. Meetings can involve travel, but more and more meetings are held virtually via the Internet, computers and/or telephone. Such competition is not symmetrical and does not exist in the consumer travel market. It would be very rare to forgo travel to Paris and substitute the trip with a virtual tour.

While these differences between supplier and customer perspectives may appear obvious, many firms become so fixated on the immediate, obvious competitor in the same industry that they fail to recognize the competitive dynamics that exist within customer defined markets. This is unfortunate because it is easy to determine how customers define markets, and knowledge of the customers’ definition can identify both important threats and new opportunities for an existing business.

Understanding customers’ perspectives on markets and competitive substitutes is as simple as asking some basic questions: when you need to ___________ (insert virtually any activity here) how do you do it?, when do you use/consume our product/service?; what other products/services do you consider as substitutes or use instead? Surveys may provide answers to such questions but all too often surveys are constructed from the producer’s point of view rather than from the perspective of the customer. More enlightening is a conversation that affords the opportunity to explore the world as structured by the customer.

Knowledge of the customers’ definition of a market can be very useful for identifying non-obvious competitive threats.

Theodore Leavitt’s classic article entitled “Marketing Myopia,” offered the example of railroads’ focus on the rail business with little recognition that they were actually in the transportation business. Who could have imagined that the mighty railroad industry of 1910 would lose business to new fangled and unproven devices like trucks and airplanes? An understanding of the customers’ perspective and the needs they are trying to meet might have suggested the potential threat. To use a more contemporary example, software “programs” are increasingly being replaced by applications that reside in the “cloud”.

But an understanding of how customers solve problems and define markets also has the potential to identify new commercial opportunities and opportunities for branding. The introduction of commercial cleaning products that contain vinegar began with knowledge that some consumers solve cleaning problems with common household vinegar. Many of what is now a legion of uses of baking soda where first discovered by consumers solving a problem that was not easily or satisfactorily solved by commercial products. Knowledge that time starved consumers often ask the question “dinner or a movie” has resulted in the advent of theaters where a gourmet meal, complete with wine, can be ordered as one watches a movie.

The identity of a brand, and what can be done to leverage a brand, also depends on consumer perceptions. Apple was never really just a computer company, and today its brand encompasses a wide array of products and services. In contrast, Kodak’s brand identity remained tied to film for far too long, and it remains an “also ran” in the digital  world.

Businesspeople would be well served to step out of their role as suppliers and occasionally enter the world of the customer. It is a fascinating place.

Contributed to Branding Strategy Insider by: David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

The Blake Project Can Help You Create A Bolder Competitive Future In The Jobs To Be Done Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

David Stewart

Connect With Us