Imagine trying to win a skeet-shooting contest… while blindfolded, and not even knowing which direction the skeet is being hurled. You would simply have to shoot wildly in any and every direction until you run out of ammo. Now you have an understanding of how difficult it is to run a profitable business without determining your target market. Many businesses can’t answer their most fundamental question: Who is your target market? They make the fatal assumption that everyone will want to purchase their product or service so long as they employ the right marketing strategy. Wise business-people, however, determine the demographics of those most likely to want or need their product or service, and market specifically to that group of people. A target market is simply the group of customers or clients who are the most likely to purchase a specific product or service. This group of people all have something in common, often age, gender, hobbies, or location.
Your target market, then, is made up of the people who will buy your offering. This includes both existing and potential customers, all of whom are motivated to do one of three things:
- Fulfill a need
- Solve a problem
- Satisfy a desire
To build, maintain, and grow your business, you need to know who your customers are, what they do, what they like, and why they would buy your product or service. Getting this wrong – or not taking the time to get it right – will cost you time, money, and potentially the success of your business.
The Importance of Knowing Your Target Market
Knowledge and understanding of your target market is the keystone in the arch of your business. Without it, your product or service positioning, pricing, marketing strategy, and eventually, your business could very quickly fall apart. If you don’t intimately know your target market, you run the risk of making mistakes when it comes to establishing the proper price, product mix, or service packages. Your marketing strategy will lack direction, and produce mediocre results, at best. Even if your marketing message and unique selling proposition (USP) are clear, and your brochure is perfectly designed, it means nothing unless it arrives in the hands (or ears) of the right people.
Determining your target market takes time and careful diligence. While it often starts with a best guess, assumptions cannot be relied on and research is required to confirm original ideas. Your target market is not always your ideal market. Once you build an understanding of who your target market is, keep up with your market research. Having your finger on the pulse of their motivations and drivers – which naturally change – will help you to anticipate needs or wants and evolve your business.
Types of Markets
The Consumer Market includes those general consumers who buy products and services for personal use, or for use by family and friends. This is the market category you or I fall into when we’re shopping for groceries or clothes, seeing a movie in the theater, or going out for lunch. Retailers focus on this market category when marketing their goods or services.
The Institutional Market serves society and provides products or services for the benefit of society. This includes hospitals, non-profit organizations, government organizations, schools and universities. Members of the Institutional Market purchase products to use in the provision of services to people in their care.
Business to Business (B2B)
The B2B Market is just what it seems to be: businesses that purchase the products and services of other business to run their operations. These purchases can include products that are used to manufacture other products (raw or technical), products that are needed for daily operations (such as office supplies), or services (such as accounting, shredding, and legal).
This market can also be called the “Intermediary Market” because it consists of businesses that act as channels for goods and services between other markets. Goods are purchased and sold for a profit – without any alterations. Members of this market include wholesalers, retailers, resellers, and distributors.
Determining Your Target Market
Product / Service Investigation: The process for determining your target market starts by examining exactly what your offering is, and what the average customer’s motivation for purchasing it is. Start by answering the following questions:
|Does your offering meet a|
|Does your offering serve a particular want?|
|Does your offering fulfill a desire?|
|What is the lifecycle of your product / service?|
|What is the availability of|
|What is the cost of the average customer’s purchase?|
|What is the life cycle of|
|How many times or how often will customers purchase your offering?|
|Do you foresee any upcoming changes in your industry or region that may affect the sale of your offering (positive/negative)?|
- On the ground. Spend some time on the ground researching who your target market might be. If you’re thinking about opening a coffee shop, hang out in the neighborhood at different times of the day to get a sense of the people who live, work, and play in the neighborhood. Notice their age, gender, clothing, and any other indications of income and activities.
- At the competition. Who is your direct competitor targeting? Is there a small niche that is being missed? Observing the clientele of your competition can help to build understanding of your target market, regardless of whether it is the same or opposite. For example, if you own a children’s clothing boutique and the majority of middle-class mothers shop at the local department store, you may wish to focus on higher-income families as your target market.
- Many cities and towns – or at least regions – have demographic information available online. Research the ages, incomes, occupations, and other key pieces of information about the people who live in the area you operate your business. From this data, you will gain an understanding of the size of your total potential market.
- With existing customers. Talk to your existing customers through focus groups or surveys. This is a great way to gather demographic and behavioral information, as well as genuine feedback about product or service quality and other information that will be useful in a business or marketing strategy.
Who is Your Market?
Based on your product / service and market investigations, you will be able to piece together a basic picture of your target market, and some of their general characteristics. Record some notes here. At this point, you may wish to be as specific as possible, or maintain some generalities. You can further segment your market in the next section.
Your Target Market: Putting It Together
Based on the information you gather from your product / service and market investigations, you should have a clear vision of your realistic target market. Here are a few examples of how this information is put together and conclusions are drawn:
Target Market Sample 1: Consumer Market
|Business: Baby Clothing Boutique||Business Purpose: |
Meet a need (provide clothing for infants and children aged 0 to 5 years)
Serve a want (clothing is brand name only, and has a higher price point than the competition)
|Market Type: Consumer|
|Marital Status: Married|
Located on Main Street, which is seeing many new boutiques open up, near the main shopping mall 2 blocks from mid-range restaurant that is busy at lunch
large number of new housing developments in the area
two new schools in construction
expect to see an influx of new families move to town from Anycity
– baby clothing also available at two local department stores, and one second-hand shop on opposite side of town
Half of population is female, and 25% have children under the age of 15
Population is expected to increase by 32% within three years
The average household income is $75,000 annually
The target market can then be described as married mothers with children under five years old, between the ages of 25 and 45, who have recently moved to town, and have a household income of at least $100K annually.
Target Market Sample 2: B2B Market
|Business: Confidential Paper Shredding||Target Business Size: Small to medium|
|Market Type: B2B (Business to Business)||Target Business Revenue: $500K to $1M|
|Business Purpose: |
Meet an operations need (provide confidential on-site shredding services for business documents)
|Target Business Type:|
Produce or handle a variety of sensitive paper documentation
Accountants, lawyers, real estate agents, etc.
There are two main areas of office buildings and industrial warehouses
3 more office towers are being constructed to be completed this year
The professional sector is seeing revenue growth of 24% over last year, which indicates increased client billing and staff recruitment
One confidential shredding company serves the region, covering area and the surrounding towns
Provide regular (weekly or biweekly) service, but does not have the capacity to handle large volumes at one time
Area’s biggest employment sectors are: manufacturing, tourism, food services, and professional services
The target market can then be described as small to medium sized businesses in the professional sector with an annual revenue of $500K to $1M who require both regular and infrequent large volume paper shredding services.
Segmenting Your Market
Your market segments are the groups within your target market – broken down by a determinant in one of the following four categories:
Segmenting your target market into several more specific groups allows you to further tailor your marketing campaign and more specifically position your product or service. You may wish to divide your ad campaign into four sections, and target four specific markets with messages that will most resonate with the audience.
For example, the baby clothing store may choose to segment its target market by psychographics, or lifestyle. If the larger target market is married females with children under five, between the ages of 25 and 45, who have a household income of at least $100K annually, it can be broken down into the following lifestyle segments:
- Fitness-oriented mothers
- Career-oriented mothers
- New mothers
With these three categories, unique marketing messages can be created that speak to the hot-buttons of each segment. The more accurate and specific you can make communications with your target market, the greater impact you will have on your revenues.
Market Segmentation Variables
Readiness to Buy
Understanding Your Target Market
Once you have determined who your market is, make a point of learning everything you can about them. You need to have a strong understanding of who they are, what they like, where they shop, why they buy, and how they spend their time. Remind yourself that you may think you know your market, but until you have verified the information, you’ll be driving your marketing strategy blind. Also be aware that markets change, just like people. Just because you knew your market when you started your business 10 years ago, doesn’t mean you know it now. Regular market research is part of any successful business plan, and a great habit to start.
Types of Market Research
The simplest way to gather information from your clients or target market is through a survey. You can craft a questionnaire full of questions about your product, service, market demographics, buyer motivations, and so on. Plus, anonymous surveys will produce the most accurate information since names are not attached to the results or specific comments.
Depending on the purpose—whether it is to gather demographic information, product or service feedback, or other data—there are a number of ways to administer a survey.
Telephone surveys are a more time-consuming option, but have the benefit of live communication with your target market. Generally, it is best to have a third party conduct this type of survey to gather the most honest feedback. This is the method that market researchers use for polling, which is highly reliable.
Online surveys are the easiest to administer yourself. There a many web-based services that quickly and easily allow to you custom create your survey, and send it to your email marketing list. These services can also analyze, summarize and interpret the results on your behalf. Keep in mind that the results include only those who are motivated to respond, which may slant your results.
Paper surveys are seldom used, and can prove to be an inefficient method. Like online surveys, your results are based on the feedback of those who were motivated for one reason or another to respond. However, the time and effort involved in taking the survey, filing it out, and returning it to your place of business may deter people from participating.
Keep in mind that surveys can be complex to administer, and consume more time and resources than you have planned. If you have the budget, consider hiring a professional market research firm to lead or assist with the process. This will also ensure that the methodology is standard practice, and will garner the most accurate results.
Tracking your website traffic is an excellent way to research your existing and potential customer’s interests and behavior. From this information, you can ensure the design, structure and content of your website is catering to the people who use it – and the people you want to use it.
User-friendly website traffic analytics programs can easily show you who is visiting your site, where they are from, and what pages of your site they are viewing. Services like Google Analytics can tell you what page they arrive at, where they click to, how much time they spend on each page, and on which page they leave the site.
This is powerful (and free!) information to have in your market research, and easy to monitor monthly or weekly, depending on the needs of your business.
Customer Purchase Data (Consumer Behavior)
If you do not have the budget to conduct your own professional market research, you can use existing resources on consumer behavior. While this data may not be specific to your region or city, general consumer research is actual data that can be helpful in confirming assumptions you may have made about your target market.
Your customer loyalty program or Point of Sale system may also be of help in tracking customer purchases and identifying trends in purchase behavior. If you can track who is buying, what they’re buying and how often they’re buying, you’ll have an arsenal of powerful insight into your existing client base.
Focus groups look at the psychographic and behavioristic aspects of your target market. Groups of six to 12 people are gathered and asked general and specific questions about their purchase motivations and behaviors. These questions could relate to your business in particular, or to the general industry.
Focus group sessions can also be time consuming to organize and facilitate, so consider hiring the services of a professional market research firm. You may also receive more honest information if a third party is asking the questions, and receiving the responses from focus group participants.
For cost savings, consider partnering with an associate in the same industry who is not a direct competitor, and who would benefit from the same market data.
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