The core of strategy is deciding the direction for the business and how to get there. Organizations deciding on the direction their business should take need to develop a retail marketing strategy that defines the target market. Ways to do so are:
Market Segmentation: Identify the different segments of customers that the business plans to serve, and the needs of such customers. Segmenting the heterogeneous total market into small groups of customers who share a similar set of wants can be based on geographic, demographic, psychographic and behavioral variables. Demographic segmentation based on age, gender, family size, family life cycle, income, occupation, education, religion, race, generation and nationality ranks as the most common type of segmentation.
Targeting: The natural step that follows segmentation is targeting a particular segment to fulfill their needs. In today's multi-cultural and diversified markets, preferences and taste vary among different segments, and organizations need to understand and accommodate this fact to become successful. Concentrated marketing or niche marketing, serving only a particular segment is an effective strategy for companies with limited resources, for it allows the company to corner a large share of a few segments rather than a small share of a large non-segmented market.
Positioning: Marketers create an image or identity of the product or brand in the minds of their target market. Such positioning, or "relative competitive comparison" defines, for instance whether the product appeals to youth or elderly, to customers who value quality over quantity or vice versa, or any other dimension. Positioning and targeting are inter-related, and the positioning of a product depends on the nature of the targeted segment.