What Is Your Target Market?
When I teach small business classes on marketing strategy, I often ask participants the question, "Who are your customers? Who will buy your product?" I am often surprised that otherwise savvy small business people either have no idea who will buy from them, or they assume that 'everyone' will.
Assumptions like this can lead to wrong decisions, wrong pricing, wrong marketing strategy – and ultimately, business failure.
The most successful small businesses understand that only a limited number of people will buy their product or service. The task then becomes determining, as closely as possible, exactly who those people are, and 'targeting' the business's marketing efforts and dollars toward them.
You, too, can build a better, stronger business, by identifying and serving a particular customer group – your target market.
One of the first things you need to do is to refine your product or service so that you are NOT trying to be 'all things to all people.' Become a specialist!
For example, in my business, an eco-tourism company, we made some specific decisions early in our market planning. As a charter boat business, we knew that there were plenty of fishing charter operators in the area, and 'party boats' as well. So we decided that we would offer sightseeing or special event charters, and that we would not allow alcohol on board, or fishing rods. Yes, this decision eliminated a percentage of the market – but it also gave us a 'niche' that we could capitalize on, and expanded our market in a way that other charter operators could not take advantage of.
Next, you need to understand that people purchase products or services for three basic reasons:
To satisfy basic needs.
To solve problems.
To make themselves feel good.
You'll need to determine which of those categories your product or service is the solution to, and be prepared to market it accordingly.
Your product or service may fit more than one category, too – our charter business primarily targets folks who just want to feel good – spending a day out on the water, relaxing and being waited on. But it also targets people who have visitors coming from out of town, or even overseas, because we represent a solution to the problem of "What will we do while our company is here? How can we entertain them, or show them our area?"
The next step in creating an effective marketing strategy is to zero in on your target market. Continue on to the next page to learn how to use market segmentation to define your target market.
Zero in on your target market by using Market Segmentation.
First of all, is your product international or national in scope? Or is it more likely that you will sell it primarily in your own region or community? In the case of our charter business, our primary market is actually national or international – tourists who come to this area from all over the world. Our secondary market is local – people who have a special event to celebrate, a company meeting or retreat to plan, or company coming from out of town.
Let's say that your primary market is local or regional, and that you live in a community with a population of 25,000 people. The first thing you'll need to do is research the 'demographics' of your community, and divide it into market segments:
Age: children, teens, young, middle, elderly
Gender: male, female
Education: high school, college, university
Income: low, medium, high
Marital status: single, married, divorced
Ethnic and/or religious background
Family life cycle: newly married, married for 10 – 20 years, with or without children.
This information should be available to you through your local town , hall, library, or Chamber of Commerce – and the more detail you can get, the better.
Next, you need to segment the market as much as possible using 'psychographics' as your guide:
Lifestyle: conservative, exciting, trendy, economical
Social class: lower, middle, upper
Opinion: easily led or opinionated
Activities and interests: sports, physical fitness, shopping, books
Attitudes and beliefs: environmentalist, security conscious.
*Note: if you are a B2B company, you'll also need to consider the types of industries available to you, and their number of employees, annual sales volume, location, and company stability. In addition, you might want to find out how they purchase: seasonally, locally, only in volume, who makes the decisions? It is important to note that businesses, unlike individuals, buy products or services for three reasons only: to increase revenue, to maintain the status quo, or to decrease expenses. If you fill one or more of these corporate needs, you may have found a target market.
By now you should have a picture emerging of who you think your 'ideal' customer is … or who you want it to be. Depending on the nature of your business, you might even be able to write a description of your customer. "My target customer is a middle-class woman in her 30s or 40s who is married and has children, and is environmentally conscious and physically fit." Based on the numbers you uncovered in your research, above, you may even know, for example, that there are approximately 9000 of those potential customers in your area! It may well be that 3000 of them are already loyal to a competitor, but that still leaves 6000 who are not, or who have not yet purchased the product from anyone. Do the research!
Lots of times prospective customers don't know about your company, or can't tell the difference between your company and others. It is your job, once you know who your best customers are, to 'target' the group that you've identified – even if you have competition.
In addition, you may decide, using the example above, that you'd also like to extend your target market to include women from 50 – 60 years of age. If you go back to the basic reasons why people purchase goods or services, and can find ways to target your efforts to that age group, you may be successful in capturing a bigger share of the market!
On the other hand, what if you 'specialized' your product or service and then researched your target market, only to discover that there are probably less than 75 people who will buy from you?
First of all, if those 75 are corporate customers who will spend hundreds on your product or service annually, then you have nothing to fear. But if those 75 are only going to spend $10 every decade on your product or service – then you need to go 'back to the drawing board' of planning your business and perhaps determining a wider target market – but at least you are armed with all the information you need to start again, or go in a different direction.
Let's face it – there's a market, and a target market, for everything.
If you don't think so, remember pet rocks?