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What is Target Market Determination (TMD)?

Determining a target market is an essential step for any business, including banks operating in Australia. By carefully analysing and identifying their target market, banks can tailor their products and services to the specific needs and preferences of their customers, ultimately leading to increased customer satisfaction and loyalty.

There are several factors that banks must consider when determining their target market in Australia. These include the demographic characteristics of the population, such as age, gender, income level, and education level. Banks must also consider the geographic location of their potential customers, as well as their psychographic characteristics, such as their values, attitudes, and lifestyles.

One way that banks in Australia can determine their target market is by conducting market research. This can involve gathering data through surveys, focus groups, and other methods to understand the needs and preferences of potential customers. By analysing this data, banks can gain insights into the characteristics of their target market and use this information to tailor their products and services accordingly.

In addition to conducting market research, banks in Australia can also use customer segmentation to identify their target market. This involves dividing customers into different groups based on their shared characteristics, such as their income level, age, or geographic location. By segmenting their customers, banks can create customized products and services that are specifically designed to meet the needs of each customer group.

Once a target market has been identified, banks in Australia can then use a variety of marketing tactics to reach and engage with their potential customers. This can include advertising on television, radio, and online, as well as using social media and other digital marketing channels. Banks can also use targeted promotions and offers to attract and retain customers in their target market.

A range of new laws were introduced on 5 October, 2021 that include a requirement for most financial products to produce a Target Market Determination (TMD) for each of their products, and to make this available to anyone considering buying, investing in or applying for their products.

A Target Market Determination (TMD) is a document that explains which people particular financial products may be suitable for. and the document sets out any conditions around how financial products can be distributed to consumers. TMDs are compulsory for most financial products and includes information such as:

  • Who is likely to buy the product, including details such as their ability to meet their financial obligations and endure financial losses
  • How and where the product will be sold
  • When and how the TMD will be reviewed.

The Australian Securities and Investments Commission (ASIC) enforces the new rules, which are called Design and Distribution Obligations, or DDO. The rules state that issuers and distributors “must take reasonable steps that will, or are reasonably likely to result in financial products reaching consumers in the target market defined by the product issuer”. In real terms, this means that any institution designing or selling a financial product must ensure that it is being sold to the type of audience for which it was designed. Companies must also review their products over time, to ensure that they still meet the needs of that target market.

ASIC states that the new obligations “require issuers and distributors to take a consumer-centric approach – placing consumer outcomes front and centre at the product design, product distribution, and monitoring and review stages of the product life cycle”.

When researching a product, ensure you read the TMD, and if a copy was not provided to you, request it via your broker.

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