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Target markets

What is a “target market”?

A “target market” is a group or groups of customers sharing common features whose characteristics, needs and objectives a product is or will be designed to meet. These customers are the end-users of the product or service, not other firms in the distribution chain.[1]

Target market identification

Product manufacturers must identify a target market of customers for whom a product or service is designed.[2]  A product distributor’s distribution strategy must be consistent with the manufacturer’s intended distribution strategy and the identified target market.[3]

The target market must be identified at a sufficiently granular level, considering the characteristics, risk profile, complexity and nature of the product or service.[4]  One way in which this can be achieved is for firms to consider whether there are any groups of customers within the target market for whose needs, characteristics and objectives the product or service is generally NOT compatible.[5]

Product manufacturers must identify a target market

Vulnerability within the target market

Product manufacturers must consider the needs of customers with characteristics of vulnerability in its target market.[6]  In practical terms, product manufacturers ARE expected to:

  1. design products or services to take account of the needs, characteristics and objectives of all groups within the target market,
  2. consider whether a product or service has features that could risk harm for any group of customers, including those with characteristics of vulnerability,[7]
  3. take active steps to encourage customers to share information about their needs or circumstances (where relevant),[8]
  4. set up systems and processes that enable customers to disclose their needs (if they choose)[9], and
  5. support their staff to identify signs of vulnerability, for instance through training and resources.

Examples of actions firms can take in relation to identifying the needs of customers with characteristics of vulnerability in the target market include:

  1. holding focus groups with customers with characteristics of vulnerability or consumer representatives at the product development stage to get a greater understanding of their needs and how products can meet them,
  2. exploring resources provided from, and consulting with, specialist organisations offering information on how the needs of customers with characteristics of vulnerability can be met in the design stage,
  3. consulting with customers or representative groups when seeking to alter or withdraw a product, and
  4. employing third-sector organisations who can review products from the viewpoint of customers with characteristics of vulnerability.[10]

Product manufacturers ARE NOT expected to:

  1. review the needs, characteristics and objectives of individual customers, to track potential vulnerability for each customer or to monitor the diverse needs of each customer, or
  2. explore customers’ circumstances exhaustively or to identify every customer with characteristics of vulnerability.[11]

Next time

Next time we’ll move on to look at “vulnerability” in the context of the Consumer Duty more generally, so stay tuned!!

[1] FG22/5, 6.18

[2] FG22/5, 6.18

[3] Policy Statement PS22/9, 6.11; Policy Statement PS22/9, 6.11; See definition of “target market”

[4] FG22/5, 6.19

[5] FG22/5, 6.20

[6] FG22/5, 6.26

[7] FG22/5, 6.27

[8] FG22/5, 6.28

[9] FG22/5, 6.29

[10] FG22/5, 6.32

[11] FG22/5, 6.29