Hello there friends, and welcome to the seventh installment in my series “The Business Growth Masterclass”.
I’ve called this session:
How to Identify Your Target Market
But first, as usual, lets recap the homework set in the last installment of the Business Growth Masterclass.:
After the last session, “Managing Your Time To Make More Profit”:
- You know what your time is worth on an hourly basis.
- You know what time(s) of day you are most productive.
- You have five strategies for improved personal time management.
Yes? Brilliant! Now let’s get on with this months material.
Determining your target market is your first job as a business owner
This Masterclass officially marks the beginning of using Step One of the five-step process, (see November’s Masterclass) which shows you to how to bring a high number of qualified leads into your business.
Qualified leads are the group of people who are most likely to buy from you – they have a current need, problem or desire that your offering will solve or serve. These people are your target market, or ideal customers. Qualified leads are generally easier to convert into customers, so a high number of qualified leads mean a high conversion rate and, of course, more sales.
A great example of this going wrong… you own a hot dog and burger business and are standing outside a large conference venue, waiting for the lunch-break so you can take advantage of a huge rush of people in a short period of time (a great way to do business) to give away small hotdogs to generate customers for your business down the road. You have prepared all your toppings, flyers with simple directions, arranged for staff to handle the rush and stocked up to the gunnels to ensure you do not miss a single prospect. The group comes out and you manage 25 free hot dogs given away when you were expecting 500.
What went wrong? You did not realise the conference attendees were members of a health and wellness group comprising of 95% vegetarians!
This wouldn’t happen to me I hear you say, but the same kind of mistake COULD be made by any business owner – in fact, a lot of the businesses I work with have made just this mistake, but in the context of their own marketplace. The morale of the story; if you are talking to the wrong audience it doesn’t matter how good your offer is – you are wasting your time. Talking to your target market is absolutely CRITICAL to successful marketing.
So, your first job as a business owner is to work out who your target market is, and how the people in it think and behave.
In this Masterclass we will cover:
- How your target market influences your marketing choices
- A step-by-step process for identifying your target market
- Types of target markets
- Examples of target markets
- Market research strategies
Generating qualified leads will make it easy to boost your conversion rate, because your prospects will already want or need your service.
A target market is simply a group of people with something in common – things like age, gender, opinion, interest, or location, – who will purchase a particular product or service. Your market can be broad or specific in scope, and it is unique to each business or industry.
Knowledge and understanding of your target market is crucial to the viability of your business. You have to know if there is enough demand for your product, or enough interest and need for your service. You have to know how to communicate with your customers, and understand their thoughts and behaviours.
Without a comprehensive understanding of your target market, you can’t make smart choices about your introductory offers, marketing strategy, pricing structure, and product or service mix. It’s kind of like driving a car with a blindfold on – you’d be headed for disaster.
In addition to being essential to confirm assumptions and understand purchase motivations, market research is something you will need to get into the habit of doing on a regular basis to monitor trends and stay ahead of the competition. Identifying your target market is not always easy, but I promise it will pay off in spades, so stay committed to your efforts as you work through this Masterclass.
Let’s start with an easy, step-by-step process to identify your target market.
You probably already have an idea of who your target market is – or who you want it to be. Start by describing who you think your target market is in two or three sentences on a sheet of paper.
As you work through this process, you may find that you were correct in your assumptions, or not. Either way, this Masterclass will uncover invaluable information about your audience.
When you set out to identify your target market, you need to find the group of people that has these four characteristics:
- They have a particular need, want or desire.
- They have the financial ability to purchase your solution to their need, want or desire.
- They have the power to decide to purchase your product or service.
- They have access to your business, through a physical location, Internet or catalogue
First, take a look at what your product or service offering is to your potential customers.
To find the group of people with the characteristics listed above, you first need to answer the following questions about your product or service:
1. What is the need, want or desire that my product or services fulfils?
| Does your offering primarily fulfil a desire, or serve a need or cater to a want? What is that desire/need/want?
|2. What does my product or service cost?
| Do you offer a high-end product, or low-cost alternative? Do you sell large items, like a kitchen appliance, or small items, like household cleaning products?
|3. Who makes the decision to purchase my product or service (who has the power or authority)?
| For example, if you provide a product or service for children, their parents are the people who make the decision to make a purchase.
|4. How are my products or services accessed?
| Does your ideal customer need to live in the same town or region as your business? Or can they access your products online, or through a catalogue?
Now let’s look at the demographic characteristics of the people that need, can afford, locate and decide to purchase your offering. Some of the information in this table may be less important than others (like ethnicity or religion) depending on your product or service and the market you are trying to attract.
||In general terms, what is the age range that my product or service caters to? Kids? Teens? Adults? Seniors?
||How much do they have to make to afford my product? Is this single or double household income? Low? Medium? High?
||Does my product or service appeal to men, women, or both?
||What is the generation of my customers? Based on the age range I identified, are they baby boomers? GenX? GenY? Where do they stand in the overall family life cycle?
||Is nationality relevant to my product or service?
||Is ethnicity relevant to my product or service?
||Are my customers married? Single? Divorced?
||Does my product or service cater to large or small families? Is family size relevant?
|Occupation or Industry
||Does my product or service appeal to people in a certain occupation, or industry?
||Is religion relevant to my product or service?
||Is language relevant to my product or service?
||What level of education do my primary customers have? High school? University?
Now lets look at your target market’s psychographics. Psychographics are the qualitative characteristics of your target audience, like personality, values, attitudes, interests, or lifestyle. These characteristics can give you a lot of insight into how to best interact and communicate with your target market.
||What kind of lifestyle group does your audience fall into? Are they conservative or trendy, travelers or soccer moms? Are they thrifty or extravagant?
|Values + Beliefs
||What are their values and beliefs? Would you consider them environmentalists or safety conscious?
||What kind of attitude do they have? Are they positive or negative? Open or critical? Easily led or opinionated?
||Are your customers opinion leaders or followers? Do they tell others what products they need, or do they need others to tell them what is trendy and what works?
|Activities + Interests
||What do they do in their spare time? What are their hobbies and interests?
||What social class does your audience belong to? Lower, middle or upper? How much extra money do they have to spend on luxury items?
So, now that you’ve gathered all this information, what does it tell you about your ideal customers?
You’ve done enough research now to create a picture of who you think your ideal customer is. Being as specific as you can, write a 1-2 sentence statement about your target market.
- My target customer is a successful young professional; a middle-class man aged 20 to 35, who is single, makes more than £10,000 per year, and is physically fit. He is university educated, and has an active interest in economics and politics.
- My target market is affluent new mothers; married women with children under five years old, between the ages of 25 and 45, and have a household income of at least £50,000 annually. She is the trend and opinion follower, and her purchase motivations are driven by her peer group.
Now that you’ve made some educated assumptions about who your target market is, you’ll have to use some market research strategies to confirm them.
Market research is the study of a particular group of consumers – or markets. It is one of the most valuable activities you will work on as a business owner, since it keeps you connected and informed about your customers thoughts, motivations and behaviours. Market research also minimises risk and assumption-based decision making, which will improve the success rate of everything you do for your business.
When you begin your market research, you need to start out with a clear question that you want answered. Otherwise, you’ll quickly get off track and fail to end up with the information you really need. Think about questions like:
- Am I right about my target audience assumptions?
- Is my target audience interested in my new product or service?
- I need more information about my target audience’s purchase motivations
- What new trends are my target audience following?
- What recent economic developments have impacted my target market?
- How can I improve my customer service?
- Has my target market changed in the past year?
Market research needs to be conducted regularly – regardless of how long you have been in business, or how well you know your target market. Trends shift, and environments are impacted by economic and political factors beyond your control.
There are two main types of market research – primary and secondary – and three main areas of market research – consumer, competitor, and environment.
Here’s a really helpful chart to use to organise information when you’re conducting your market research. This will help you conduct research that is comprehensive and cost effective.
(First-hand information gathered from your customers or about your customers. i.e., customer surveys, observations about the competition, etc.)
(Second-hand data or research that has been completed by or for someone else, but can be applied to your objectives.)
(Demographic, behavioural, psychographic and geographic characteristics.)
|> info right from the source
> can be time consuming and costly – but most valuable
> most current
> most specific
> trade journals
> public surveys by larger companies
> government publications and surveys
(Marketing, product and consumer observations you can make or gather from your competition.)
|> what works, what doesn’t
> adding value to existing offering (to give yourself an edge
> types of products that consumers are interested in
> types of lead generation strategies your competition uses, and the types of potential customers that you currently see
(Social, economic and political trends that may impact your business or your customers thoughts and behaviours.)
> trade journals
> consumer reports
Strategies for cost-effective secondary market research
Demographic Research (Customer)
Basic demographic research is something you won’t have to conduct yourself. Every town or region will have demographic information available online, or in town halls, libraries and business centres. National and regional statistical information is also available online or through government agencies.
Online and Consumer Research (Customer and Environment)
Primary market research can be expensive, so secondary research on general consumer behaviour and purchase data can be extremely useful for small businesses. Some information will be available online, while other information (usually free) will be available at your local chamber of commerce and business centres.
Primary market research strategies you shouldn’t miss.
Ground Research (Customer or Competition)
Spend some time in your local area at different times of the day observing and talking to the people who live, work, or spend time there. What do you notice about the area? How well is it taken care of? Why do people spend time here? Is anything missing? Get a sense of their age, gender, clothing and any other features.
Competing Businesses (Competition)
If you have direct competitors in the same local area, spend some time being “their” customer and making observations about their business. How do they advertise? What market are they targeting? Is there a niche market that is being missed?
Surveys (Customer or Competition)
Surveys are the most popular way to gather first hand information from your existing and potential customers. Take your time to administer them carefully and thoughtfully – surveys can get complex and variables can be high.
- Keep your questionnaire short and focused on getting at the information you need to answer your market research question. This will encourage a higher response rate.
- Remember that your information will only be as good as the people you ask for it. Try to get as broad a cross section as possible. Depending on your market research question, you may not want to limit it to your existing customers.
- Choose a survey method – telephone, web or paper-based – and understand the pros and cons of each. Research some survey templates, and spend more time than you think you need to on crafting your survey.
- Include basic demographic questions on your survey so you can cross reference responses with factors like age, income, sex, and profession.
Website Analysis (Customer)
Use a website tracking system like Google Analytics to monitor how visitors to your website behave and use the information available. These programs will allow you to see how many people visit your site, where they are from, what pages they are looking at and how long they spend on your site.
Customer Loyalty and Purchase Data (Customer)
Your point of sale system (if you have one) – depending on the level of features it offers – may also be able to run reports on customer purchase patterns and trends. If you have a customer loyalty program, you can keep track of purchase information in each customer’s file or account. The type of information you’ll need to keep track of here is behavioural: brand loyalty, product or service usage, purchase frequency, and readiness to buy.
Focus Groups (Customer)
Assemble groups of six to 12 people and ask them general and specific questions about their thoughts, opinions and habits as related to your marketing question. Be sure to assemble a cross section of people that is representative of your target market.
When you’ve completed your market research, analyse what you’ve learnt. Go back to your original question, and critique the outcome.
How has your market research supported the question(s) you set out to answer? Were your original assumptions confirmed or refuted?
- Does my target market exist in my geographic area?
- Does my target market actually want what I’m selling?
- How does my target market want to purchase from me?
- Is my target market interested in my new product or service?
- How does my target market want me to communicate with them?
- Is my target market large enough in my local area to support my business?
- Are there areas of my research I could dig into for more information?
You may discover some hard facts to face about your business. Perhaps there is not a large enough market base in your area to support your business. Maybe you’ve spent a few hundred or thousands of pounds going after the wrong type of customers. This is all okay – don’t get despondent – it’s all valuable information that you can work with to make better decisions about your marketing strategies and product or service offerings in the future.
If you have flexibility in your product or service, you may be able to find ways to enhance your offerings and extend your target market to include more people, or a larger share of the marketplace.
Your market research is ongoing – each time you talk to a customer, supplier or sales rep, you’re gathering information about your clientele, and thus conducting market research. Consider keeping a log at the point of sale for staff to use to record customer comments and complaints. Review the log for customer returns, and reasons for returns, to get valuable feedback on your offering.
Remember, audiences, trends, products and services change, so stay ahead of the curve and keep on top of your market.
Plan to make market research a regular part of your business, and schedule time and money for primary research at least once a year. This is the only way to stay ahead of the competition when it comes to trends and environmental changes beyond your control.
If you would like some help with the ideas introduced in this Masterclass, or to discuss any other aspect of your business growth strategy, use the following form to get in touch:
The next few Masterclasses are about applying the information you have learned about your target market to refine your marketing strategies. You’ve clearly identified who your target market is, and how those people think and behave, so your next task is to determine what to say and how to reach them.
In the next Masterclass, we’re going to look at your marketing message and see how clearly you’re communicating with your audience. The strength of your marketing message is the backbone of your marketing materials, and a huge factor in the success of your lead generation strategies.