A company carefully defines its target market. Now the company will be able to focus on people with a preexisting need or interest in what it offers. Therefore resulting in higher sales and less wasted time and effort on potential customers that are not interested in what the company has to offer. This is an example of what?

Suppose you recently graduated as a chef and you want to set up a restaurant. Who do you think your market will be? To say anyone who is hungry would be a little vague.

The first you have to know is what type of food are you planing to offer in your restaurant. As a chef you are able to elaborate several types of dishes (form pasta to Chinese). But will you be able to sell all of them?

The best way to start your business is to try to segment your market:

Who do you want as clients in your restaurant?
What dishes are you going to serve them?
Is your restaurant going to be expensive and luxurious, or will it be more like a diner for middle class customers?
What other services may your future clients want you to offer, maybe valet parking?

Almost all businesses must define and segment their markets in order to be able to focus on their potential clients and not waste money and resources with unsuitable segments.

Once you know who your potential clients are, you can start and direct your marketing strategy towards them.