Understanding your target market and the behavior patterns of your potential consumers is one of the most important and underrated aspects of planning and running a business. In fact, it is one of the core marketing fundamentals that should be considered for a business. And coincidentally, not identifying your target market properly is one of the biggest advertising mistakes and marketing errors that you can make because it will cause all your marketing effort to be seen by the wrong people who will be very difficult to convert into customers.
Since choosing your target market is a business planning topic, you might also want to check out my popular business plan book which has a fresh and innovative new approach to business planning, and my marketing plan book which deals specifically with marketing topics and identifying the right ways to reach your target market with your promotional messages.
1) Easier to Target Your Potential Customers
2) Addressable Market vs. Overall Market
3) Targeting Does Not Mean Limiting
4) Marketing To Your Target Market
5) Coaching To Help You Identify The Target Market
6) The Rest Of Your Business Plan
7) Once You Are Ready To Promote Your Business To Your Target Market
8) How Do You Know That You Chose The Right Target Market?
9) Demographics And Psychographics
Understanding your consumer makes it easier and cheaper to reach them in large volume with targeted advertising and outreach. It also makes it simpler to create a product that better fits their needs, and is used by them in a manner that is convenient to them (important for product adoption and customer retention). It also helps you to better understand your market size which enables you to make more accurate financial estimates because you will have a deeper understanding of your total addressable market.
The addressable market is the part of the total market which you can target with your product. It is important to understand the difference between the entire market and the addressable market. If, for example, you are opening a fine dining restaurant, the overall market may be all the people in your city, but your addressable market is much narrower. It is only those people who like to eat certain kind of food and are in a demographic which can also afford to eat out instead of dine at home. Your addressable market is probably more constrained by geography as well as people will not travel too often out of their way for food. They may do it rarely, but not too often. So understanding your addressable market helps you make less mistakes when calculating the size of your market.
For example, the United States shoe market is in the billions of dollars per year. But if you made a shoe like a slipper for men, then your addressable market is some portion of all men.
At that point it might be tempting to say that the addressable market is all men. But that is not true. Many men hate wearing slippers and it is very difficult to force kids to wear slippers. Older men tend to wear slippers at home more commonly, but they shop least often and many elderly people live in poverty and can get items like slippers for free. The deeper you understand who behaves and spends in what particular way, the better you will be able to estimate who you can sell to. Additionally, how will you possibly market to all men? They are in every walk of life and you cannot possibly reach there with your advertising. If you are not able to effectively pick where to advertise, your business might not make it.
Here is a brief video on the importance of identifying your target market. The video also explains how to identify the target market correctly for you business.
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A common point of misunderstanding is thinking that targeting a certain demographic limits the total opportunity of the business. There are two reasons why this is a misleading line of thought:
1) Choosing a target market is meant to help you focus your advertising efforts and optimize your product to make that certain group very pleased with it. It still means you will take anyone as a customer if they want to be your customer. You are not rejecting customers. You are helping your business get the most out of a certain demographic of people.
2) If you start small with sharper focus on a certain demographic, it does not mean you cannot grow bigger. When your business is ready, you can add more demographics to target as you expand.
When you are thinking about people who might be in your target audience, it is easy to get carried away by only considering the market as a whole. For example there is the ecommerce market or the elearning market or the automotive market. But these are just big multi-billion dollar industries and considering them to be your target market as a whole might be misleading. All those industries have niche markets within them. To understand more about finding your business niche, take a look at this article that explains how to find a business niche.
In addition to thinking about your greater industry or niche, also think about your individual customer. If you gain a precise understanding of who your ideal customer might be, you will gain insight of how to best promote your business to them and how to create a product or service that suits them the most. When you are thinking about your individual customers, you must think of them in demographics and psychographics.
Demographics are things that can be measured. Examples of demographics are things like people's age, marital status, whether they own a home or rent, education level, income level, whether they have a car or not, whether they have children or not, and how many children do they have if they have them, their job, travel history, hobbies, political affiliations, etc.
Psychographics, on the other hand, are things like their likes, fears, dreams, hopes, psychological predespositions, self awareness, aspirations, ect.
To properly cater to people, you must understand both, the psychographics and the demographics of people within your target market.
If you are in the business planning phases of starting your company, most of your strategy is likely based on assumptions and educated guesses. That includes your how you think about your target market. Without proper testing and exploration, it is dangerous to start a business with only a theoretical understanding of your target audience. There are a few ways to test your target market. The simplest way to do that is to talk to people who you think are in your target market and ask them whether what you are working on is compelling to them. If they say it isn't, that is a learning opportunity. You can ask them why not, and they will give you their perspective that you can use to refine your assumptions. If they say that what you are working on is interesting to them, don't take that as a yes and stop asking questions. Probe them further by asking what they'd pay for such a product or service and whether they would buy it right on the spot. You can do that even if you don't already have a product or service ready to sell. The reason for doing that is that many people will say that they will buy your product or service, but if you ask them to actually buy it, they will find some reason why they won't, and that objection is another learning opportunity.
Another way to test your target market is to join many Facebook and LinkedIn groups which have members who fit your target audience, and ask questions in the groups. Many such groups have industry veterans in them, and they will be able to help you understand your business and industry, and give you their opinion on who your product or service fits best.
Once you identify who your target consumer is, you need to begin marketing to them and reaching them. We have an article on this topic too. The article is called marketing strategies for different business types.
I can help to coach you through the process of identifying your target market, and more importantly, I can help you create a very good and effective marketing strategy to help you reach your target market and sell to them. Here is a page that describes how I can help you as a marketing strategist. Any time you create a business plan or start a business, you should never start it without understanding who your target customer is and how to promote to them. Without a marketing strategy, you won't be able to get clients.
Identifying your target market is just one part of business planning. If you have a good business idea, and need to write a complete business plan, check out this article on how to write a business plan, and watch the videos below that explain how to go from business ideas and how to do proper business planning.
Once you identify your target market and are ready to advertise to them, you will need a website for your online marketing. Take a look at our step by step tutorial for how to set up your website in one day so that you can be up and running quickly and begin to promote your business.
Article by Alex Genadinik