Every market is today’s world is so vast with so innumerable competitors, that it becomes imperative for any business to identify and target a particular sector of the market. To do that, a business has to first segment the market.  Once the segmentation is done, a business would target a specific group of consumers who are “most likely” to buy their products and services.

Let us look at the car manufacturing industry for instance. The high competition present in such an industry implies to the fact that it is very important for every company to have a target market, in order to have a comparative advantage over its competitors. For example, Mercedes-Benz targets the high income sector of the society, while Toyota targets the lower middle class with lesser disposable income. Suppose, if Mercedes-Benz decides to sell its cars in a country like Somalia at its normal high prices, it will not be able to incur high (or rather any) sales. Toyota, on the other hand would be much better off selling its cars in such a country.

Therefore, it is very important for any business to identify its target market and sell accordingly in those markets.