Target Market Defined
A target market is defined as a specific group of potential buyers for which a business positions its products and services. Or in simpler terms, it's the group of people who are the most likely buyers of your products or services.
Know Your Target Market
Too many new home business owners don't take the time to define their target market, which means they waste time and money as they seek clients and customers. Some home business owners define their target market as "everyone," but, in reality, ideal buyers have specific traits, characteristics, and situations that your product or service can specifically speak to.
Knowing your target market allows you to place your marketing messages where your market hangs out, using words and enticements that specifically speak to their needs. For example, if you're a virtual assistant that works with Realtors, you could run an ad in your local paper that serves a million people. There is a possibility that a million people will see the ad, but most of them won't need a virtual assistant, and if they did, their mindset isn't on hiring a VA when they read the local news.
However, if you placed an ad in the local Realtor Association newsletter, your audience would be smaller, but they're all in your market and are open to real estate news and resources.
Segment a Market
The characteristics, traits, situations and wants/needs of your ideal buyer fits them into "segments" of the market. The three most common segmentation types are:
- Geographic segmentation that is based on location like state, city or street addresses.
- Demographic segmentation which focuses on features such as a gender, race, and age.
- Psychographic segmentation that considers attributes relating to personality, values, attitudes, interests, or lifestyles, like being an active runner or a Republican.
To segment potential customers into a target market, you need to answer:
- How old is your ideal customer?
- How much money does he/she make?
- Is your product or service most suitable for men, women or children?
- Are they home-owners?
- Where does your target market shop?
- Where do they live?
- What type of education do they have?
- What problems, needs or wants do they have that your product or service will fill?
The better you understand and know your ideal buyer, the more effective your marketing campaigns and product messaging will be in attracting customers. Not having a clear understanding of who your customer is will result in lost marketing dollars. Casting too wide of a net diminishes the concentration of your message.
It is possible that you'll have several markets, but it's essential that you market to each group specifically. For example, many groups (i.e., new mothers, middle-aged mothers, and women with health issues) want to lose weight. But not all want to lose weight for the same reasons (i.e., lose baby-weight, look sexy again, improve health). Marketing to a new mother about losing weight to avoid diabetes, won't generate the results as marketing to her about regaining her pre-pregnancy weight will.
An Essential Tool
The most compelling reason to identify your ideal markets is that it will save you marketing time and money. The better directed your marketing messages are to a specific market, the bigger the results.
Having a well-defined target market is essential in the planning and research phase of your business, as well. Consider these five areas of business planning where an appropriate target market is the cornerstone of the research:
- Simple Feasibility Study: Quickly assessing your business idea requires a familiarity with the buying habits of your target market. If you are selling baby items to 30-year old male college students, your business is bound to fail. To determine whether or not your business idea will even work, a target market must be determined.
- Market Research: Suitable market research consists of understanding five areas surrounding your business. The ideal customer or target market is one of these vital areas. Taking time to conduct primary and secondary research on your target market will save you time and money.
- SWOT Analysis: A SWOT analysis is the strengths, weaknesses, opportunities, and threats facing your business. It includes anything surrounding your target market. For instance, if you have a health-related product targeting men ages 55-70, a threat against your target market could be an income level drop once they reach the retirement age of 65.
- Business Plan: A good business plan has many facets, but it's basically written around two main areas—the product and the target market. Not having a clear understanding of your target market, its buying habits, its behavior, and its preferences will leave you with a flimsy business plan. A flimsy business plan will not help you acquire funding, investors or key employees.
- Marketing: Your target market is to whom you write and design all your marketing materials. Not getting your target market right would be like writing a letter directed to your father, and sending it to your sister. The message will not be conveyed properly, and your sister will end up confused. You'll waste advertising and prospecting dollars on inappropriate messaging targeting the wrong audience.
Think about the marketing messages you respond to whether it's on a website, television or a direct marketing piece in your mailbox. Which ones do you stop and read, versus those you ignore? Which ones have you seeking more information or even buying? Odds are, the marketing messages you respond to are speaking directly to you and your needs. You want to do the same with your product or service.