If there is one thing that harms many new businesses, it’s that they don’t take the time to properly define their target market. Or they go about it all wrong. Understanding your target market is vital for ensuring that you don’t waste money or energy on going after clients that aren’t a good fit for you business.
While many businesses will define their target market as “anyone”, this isn’t really helpful. Your ideal buyer will have specific characteristics, pain points and situations that your service or product can speak too. On the other hand, having a target market that is too narrow can also be harmful.
Understanding your target market will allow you to use the right words and enticements to speak specifically to their needs, as well as place your messages where they’re most likely to see them. As an example, if you’re a graphic designer that works specifically with real estate agencies, you could post an ad for your services in the local newspaper. You’ll probably pay through the nose for that ad, and most people who see it won’t be specifically looking for your services. If you understand your target market, you instead place your ad in the newsletter for the local Realtor Association. While your reach would definitely be smaller, you’d also be more likely to appear in front of someone who actually requires your services.
WHAT IS A TARGET MARKET
So now you know why understanding your target market is important, let’s get into the details of what a target market is. Too many people think that a target market is the customers that you’re already serving. For instance, if you’re a digital agency that currently has a lot of property development clients, that doesn’t mean that they are necessarily your target market.
A target market is the group who are most likely to purchase your products or services, and who’s needs you could most easily fulfil. Because these people already want or need your services, it makes the most sense to market to them. The alternative, which is marketing to everyone else, is inefficient and expensive.
FINDING YOUR TARGET MARKET
To determine who exactly your target market should be, you can start by answering these three questions:
- What problem could your product or service solve? Does it help companies better manage their leads? Allow people to communicate better? Does it kill spiders?
- What type of person is most likely to have this problem, and in what situation are they most likely to use your product or service? This will help you to narrow down whether you should be focussing on individuals or businesses.
- Does your product or service help different groups with different needs? It’s possible to have more than one target market, or market segment. These segments will be divided on how you utilise your product or service. As an example, bike shops may service families with children choose a safe bike for their little one. Or, they could service professional athletes who may need assistance choosing a professional racing bike.
Get really specific with your answers. Try to narrow down the pain points your product or service could address for your audience, and who would typically feel that pain.
SIX STEPS TO DEFINING YOUR TARGET MARKET
Once you’ve answered the above questions, you can start to get into more detail about who exactly your target your market is. Understanding who you are selling to, what they stand to gain and why they should choose your product or service above that of your competitors helps you to increase the effectiveness of your marketing messages.
1. UNDERSTAND THE PROBLEMS YOUR PRODUCT OR SERVICE SOLVES
As we’ve mentioned, this is the first question you should answer when you begin your journey of understanding your target market. Once you have a good idea of exactly the pain points your product or service addresses, you can begin to identify who is most likely to experience these pain points.
2. PAINT A PICTURE OF YOUR IDEAL CUSTOMER
Once you’ve made a list of all the different problems your product or service could solve, you can start to build up an idea of who you should market them to. You can segment your potential ideal customers in many different ways. For instance, if you service a local market, you might know that high net-worth individuals tend to live in certain neighbourhoods. Alternatively, you could group your prospective clients by market sectors, such as manufacturing or recruitment.
Answer as many relevant questions about your ideal customer as possible. If they’re individuals, are they married? Are they male or female? Do they work a specific job?
If they’re a business, what industry are they in? Are they B2C or B2B? What is their yearly revenue?
3. WHICH SPECIFIC CUSTOMERS WILL BENEFIT FROM YOUR OFFER?
Ask yourself a few more questions:
- Who will these pain points be the most bothersome for?
- Who will have the most to lose by not dealing with these issues?
Your job is to demonstrate that the cost of not addressing their pain points and sorting out the issues is greater than the cost of purchasing your product or service to address them. This allows you to craft benefit-driven messaging to draw prospective clients in.
Factors such as stress, emotional distress and the prospective customer’s reputation all play a role in the value of your offering.
4. THINK ABOUT NICHE MARKETS
Nowadays, we live in a world of niches. Just like people are no longer restricted by television schedules, and can watch whatever they want, whenever they want, they are similarly no longer restricted when it comes to the other content they consume. The internet is excellent at delivering personalised recommendations for products and services, and it has outdone many of the traditional and outdated distribution channels businesses used to have to deal with – along with the challenges they brought along.
All of this means that it’s now easier to be a big fish in a little pond. Not only is it now easier to gain referrals and build your reputation, but you’ll probably also find that you get more from your marketing.
Now that you’re a little bit closer to understanding your target market, you can begin to segment them:
Do you know what particular type of person or business you want to work with?
Are there any specific geographical locations you want to work in?
Are there any defined market sectors you particularly want to work in?
5. WHAT COMPANY EXPERTISE CAN YOU OFFER?
One way of deciding on the right markets to pursue is to think about your business and its employees.
- Do you have particular areas of expertise? For example, do you have a lot of experience in particular markets, such as working with lawyers?
- Do you have unique knowledge of a specific geographical area?
- Are you better at getting on with certain types of people?
All these factors could help you establish a particularly attractive offering for your target market.
Take an accountant working alone in Manchester, for example. For a start, working all over the country is probably not practical. They may therefore decide to only work with clients in the North West.
It may be that before going it alone they worked in-house for a couple of different entrepreneurial businesses. Therefore, the accountant may decide to make their marketplace ‘Entrepreneurs in the North West’.
Suddenly, if you are an entrepreneur in the North West, this is an accountant probably worth knowing. Because the accountant only works in this area, they are more likely to introduce you to the right people and know about schemes and funding available to entrepreneurs.
Meanwhile, by concentrating in this marketplace, the accountant knows which websites to look at and belong to, which publications to read and possibly write for, and which networks to attend. Within this target market it will be quite easy for the accountant to become known. Without limiting their market it would almost be impossible to know where to start.
6. WHO ARE YOUR COMPETITORS?
Once you have decided the answers to some of these questions, you must look at the market to see what else is available. The question you must have an answer to is:
- Why am I uniquely placed to solve the problem?
It may be that for some marketplaces there is no answer. However, in certain sectors or geographical locations there may be a compelling response to that question.
If you are unable to answer the question, you either have the wrong target market or the wrong offering. In this case, more work will need to be done before you start targeting your potential customers.
ZEROING IN ON YOUR TARGET MARKET
Once you are clear about who is most likely to need or want your product or service, it’s time to get even more specific about this group, or groups, of people. There are several different ways to define your target market, based on different characteristics.
You should decide which approach comes closest to exactly describing your perfect customer:
- Consumer or business – Start by clarifying if you have a B2B (business-to-business) or a B2C (business-to-consumer) offering.
- Geographic – Local brick-and-mortar stores may find that their most likely customers are within a two-mile radius of their store, or within a particular zip code. This target market is defined geographically, based on where they live or work or vacation or do business.
- Demographic – Describing your best customer demographic means that you define your target market in terms of their gender, age, income level, education level, marital status, or other aspect of their life.
- Psychographic – Sometimes customers don’t fit into a particular group based on outward characteristics, but more based on internal attitudes and values. These are psychographic characteristics.
- Generation – Many companies today define their target market based on which generation they were born in, such as baby boomers or Gen Y.
- Cohort – Other companies find that their target market is better defined by looking at cohorts, or groups of people who had similar experiences during childhood, such as being raised by a single mom or attending boarding school.
- Life stage – Other target markets are more alike because of the stage of life they are in, whether it’s post-college, retirement, newly married, newly divorced, or parenting young children, for example.
- Behavioral – Another approach is simply based on frequency of use, or behavior, which could be a good choice for nail salons, car washes, or vacation rentals, for example.
Armed with a clear understanding of your target market(s), you can now begin to craft marketing messages that appeal to that particular group’s pain points and preferences.