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Identify Your Target Market
Overview
Imagine practicing archery with your eyes closed
or throwing a football with a blindfold on. In both cases, being prevented
from seeing your target would make it nearly impossible to hit it. This concept
can easily be applied to business, as well. Doing business without knowing what
your target market is will prevent you from reaching your objectives: increased
sales, market share or brand awareness.
Where the blanket approach of mass marketing was
touted by marketing professionals of years past, today's industry experts are singing the
praises of one-to-one, or relationship marketing. And rightfully so. Today's consumers, as
you've heard many times, are savvier than ever before. With access to nearly any piece of
information they want via the Internet, consumers don't want salespeople spouting off
scripted presentations. Rather, they need advocates who are willing to help them find real
solutions. How can you do that? By learning who your customers are; by finding out their
real needs; and by offering them tailored products and services that work for them. The
first step in attaining those lofty goals is to choose a customer base that is appropriate
for your business.
Outline:
- Identify Potential
Customers
- Conducting Market Research
- Choosing a Target Market
- Compiling a Customer
Profile
- Resources
I. Identify Potential Customers
There are two types of customer groups
that you can target: individual consumers or other businesses. Individual consumers
are somewhat more difficult to target because they are diverse and unpredictable,
they typically have small individual budgets, and their buying preferences may
change as they age. Businesses as a target market tend to be fairly stable over
time and have large budgets to spend on various products and services.
It is not necessary to choose just one customer
group. You may choose to target both businesses and individual consumers if it makes sense
for your company. However, modifications may need to be made for your product or service
if you choose to go this route. For example, the owner of a gift basket business may
target mostly individual consumers as her main source of revenue, but have a secondary
revenue stream from corporate customers. For the individual consumers, she may offer many
customized options to satisfy their diverse tastes, and she would probably charge a higher
price to ensure a good profit margin. For her corporate customers, she would likely offer
a more limited product line — at quantity discounts — to allow her to
mass-produce the baskets for large orders.
Back to Outline
II. Conducting Market Research
There are many sources of market research
— much of which is free of cost — that have already been compiled
that you can draw from for basic information about your prospective customer
group. Search the Internet and your local library for studies and data that
have been gathered for your particular industry.
For more specific information on your
prospective customer group, you will need to either hire a marketing research firm to
conduct formal surveys for you, or you'll need to learn how to do it yourself. Since
marketing research firms are rather expensive, most small owners will opt to conduct the
research themselves. While the research you gather may not be as structured or in-depth as
that of a research firm, you can get sufficient information to identify your customer base
at a fraction of the cost of what you would spend otherwise.
The most important objective of conducting
market research is to find out what markets your competitors are currently serving, where
market opportunities exist, and which markets will be most profitable for your business.
To begin, make a list of all of your
competitors, including everything from large corporations to small mom-and-pop shops. If
they have Web sites, visit each one and gather as much information about their products
and services as you can, including prices, customer service policies, delivery methods,
warranties and return policies. If some of your competitors do not have Web sites, it is
perfectly legitimate to call the company and ask for the information from one of the
customer service representatives.
After gathering the information, compile it into
a table or spreadsheet. Identify areas that are weak or absent to identify possible market
opportunities. For example, if you find that none or only a few of your competitors
currently offer same-day delivery of products, this may mean that there is a market
opportunity to serve a group of customers who must have your products the same day they
order them. Don't forget: You can charge substantially higher prices for the convenience
of same-day delivery of your products.
Ask yourself:
What products or services are my competitors not
offering that I could offer profitably?
What competitive advantages do I possess that my
competitors can't offer customers even if they wanted to?
What do my competitors offer that I could
improve on?
Once you have a handle on your competitors, next
you need to focus on your prospective customers. Conducting surveys is an easy way to find
out your prospective customers' needs, buying preferences and spending habits, which in
turn identify if they will make a good customer base for your company. Keep in mind that
you should offer some sort of benefit or inexpensive giveaway to motivate customers and
prospects to fill out your questionnaire. Some good examples include coupons or discounts
on the next purchase they make from your company.
Your survey must include questions that obtain
information on the following aspects of your potential customers:
- Demographic information — Includes age, sex,
nationality (if necessary), etc.
- Psychographic information — Includes
lifestyle data like hobbies, interests, opinions, etc.
- Geographic information — Includes
information about where the subject lives and where he or she purchases products and
services. This can be as broad as the country or state in which they live, or as narrow as
the county, city and neighborhood.
- Behavioral information — Includes
information about how the subject uses products or services.
- Benefit information — Includes information
about the perceived benefits the subject receives from products and services.
Finding groups of customers to take your survey can sometimes present a challenge. To
find prospects, visit Web sites, newsgroups, forums and listservs, or contact
non-competing companies that share your prospective target market. For example, if you own
a health food store, you may contact a local health club to ask them if you could conduct
surveys of their clients on their premises. In exchange for them allowing you to take
advantage of their space and goodwill, you could offer their clients some sort of
cross-promotional item. For example, give them a generous coupon for your products that is
exclusive to members of that health club.
Back to Outline
III. Choosing a Target Market
After you have conducted a sufficient
number of surveys, compile the results to determine which markets make the most
sense for your business to target. Ensure that the market you choose:
- has easy access to your products and services,
whether it is by visiting your store, or ordering by phone, fax, email or your Web site
- is not inundated with other products and services
that are indistinguishable from yours
- is willing to pay a price for your products and
services that allows you a reasonable profit margin
Back to Outline
IV. Compiling a Customer Profile
Just as a mission statement guides
the operation of your company, a customer profile will guide your sales effort.
Develop an overview of your target customers so that you and all of your employees
are clear about whom you are selling to.
Here is an example
of a typical customer profile:
Company X, an upscale sporting goods
company, targets American male executives between the ages of 25 and 35, with
an average household income of greater than $100,000, who enjoy outdoor sports
and purchase sporting goods at least twice per year for recreation and travel.
After you have a clear customer profile, you and
your staff must learn to think like your target customers to anticipate their needs. You
must track the trends and preferences of this group regularly by staying in constant
contact with them and altering your products and services accordingly. Good methods for
staying on top of your customer base's changing preferences include: informal face-to-face
discussions, in-store surveys, direct-mailings, and feedback requests on your Web site, in
your store, and included with all products shipped.
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V. Resources
Books
Peter Francese, Rebecca Piirto, "Capturing
Customers : How to Target the Hottest Markets of the '90s," American Demographics
Books 1995
Linda Pinson, Jerry Jinnett, "Target
Marketing : Researching, Reaching and Retaining Your Target Market," Dearborn Trade,
1997
"Target Marketing for the Small
Business," Upstart Publication Co., 1996
Sally Dibb, Lyndon Simkin, "The
Market Segmentation Workbook : Target Marketing for Marketing Managers,"
Intl. Thomson Business Products, 1997
Web Sites
The American Marketing Association.
American Demographics, publisher of
American Demographics magazine and Forecast, a newsletter of demographic trends
and business forecasts.
U.S. Census Bureau. Especially useful
are the Population Profile, and the Statistical Abstract of the United States.
The Social Statistics Briefing Room
Data Web Sites for the 50 States.
Back to Outline
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