As a business owner, you have to constantly strive to understand your target market so you can best serve your customers. Your products and services may have mass appeal. But it is unlikely everyone in the world wants or needs them.
Your goal should be to find the group of customers most likely to buy your product or service. In other words, strive to identify your target market.
Understanding your target market means knowing your customers well. You need to know their wants and needs. You should know where they live, their age, gender, and preferences.
In this article, we will go over how to understand your target market so you can increase sales for your business.
What is a Target Market?
A target market refers to the group of people you believe are most likely to buy your product or service. They are the customers you have in mind when you develop and position your product.
Your target market is the consumer you think about when designing your product. Most products and services are built with a specific consumer in mind.
When you create your marketing plan or strategy, start by identifying your target market. Focusing your attention on that market will help your business increase sales and improve revenue growth.
Difference Between Target Market and Target Audience
The terms “target market” and “target audience” may seem similar. But they have a slight difference.
A target audience is a segment within your target market. It is the group of customers you want to attract for one specific marketing campaign or promotion.
For example, say you own a running gear shop in the city. Your target market may be runners and joggers in the city. If your city hosts a local marathon each month, you can market your gear to potential marathon runners for that event. Your target audience is the marathon runners on that particular day, not every runner in the city.
Examples
To help you grasp what a target market is, we’ve highlighted a few hypothetical examples.
1. Target market for a Pet Food Company
Jack owns a pet food company in Decorah, Iowa. Decorah is a rural residential area with many family homes and a few businesses and industries.
Jack may define his target market as married couples aged 30 to 60 who live in Decorah and have a family cat or dog. Now that he knows this target market, he can focus his marketing on families instead of businesses and working-class residents.
2. Target Market for a Gym
Don owns a gym in a populous metropolitan city. The city has many businesses, companies, and apartment homes. His facility has treadmills, dumbbell sets, stationary bicycles, stretching mats, and more.
It can serve anyone living in the city. But Don’s target market might be men and women aged 18 to 36 who earn at least $25,000 a year and love to exercise, stay fit, and stay active.
Everything he does aims to improve the experience for this client group. He may play the music they listen to or create ads geared toward them.
3. Target Market for a Coding Challenges Website
Lily manages a coding challenges website called LiliCode. The site offers random code challenges to coders and developers who want to sharpen their skills.
Lily notices that most people who use her website are learning to code, not professional developers. She may define her target market as men and women interested in learning coding and web development.
To help these customers learn better, she can add video tutorials and more example questions.
Why Is It Important to Understand Your Target Market?
Understanding your target market helps you reach your customers effectively. You can place your ads and marketing messages where they are most likely to see them, and use words that speak directly to them.
Knowing your target market also helps you choose the best marketing channels, which improves your marketing ROI. Going back to Jack’s example, he may place his ads in family and parenting magazines instead of business magazines, since his target market reads those more.
Understanding your target market lets you tailor your product and service to what your customers want. Don plays music his customers love to keep them motivated at the gym. Lily adds video tutorials to her coding challenges so her customers can learn more easily.
How to Research and Identify Your Target Market
Now you know what a target market is. But how do you research and develop this market, and identify the customers who use your product or service the most?
The people in your target market usually share values and characteristics. For example, they may be in the same age group, live in the same area, or share similar interests. When researching your target market, your goal is to pinpoint these common characteristics.
Below are tips for researching your target market:
1. Define your Market
The first thing you should do is identify whether your company’s model is B2B (business-to-business) or B2C (business-to-consumer).
The tactics you use to identify a B2B target market differ from those for a B2C market. The factors that guide a business buyer differ from those that drive an individual consumer. Here is how a B2B market differs from a B2C market:
- A B2B market is price and logic-focused, while a B2C market is emotion and behavior-focused.
When marketing to a B2B market, it’s best to use logic rather than emotion. Show the product’s affordability, its features, and how it benefits the organization.
For end customers, you can tell an emotional story about the product instead. Business buyers care more about price and practical value than a good story. Individual customers often care less about price and more about how the product makes them feel.
- Personal relationships are more important in B2B than B2C markets.
B2B relationships tend to be long-term, and B2B clients often want direct contact with you when questions come up. A B2B purchase can also involve more people than you expect. Gartner’s 2023 research shows the typical B2B buying group includes 8 to 13 stakeholders, not just one decision-maker.
In B2C, the relationship is impersonal and mass-communicated. Your sales and support staff don’t need to know every customer personally or talk with each one directly.
- B2B markets involve a lot of consultation.
B2B clients often hold internal meetings and discuss budget before buying from you. In B2C, the end customer decides alone whether to buy.
- A B2B target market is usually smaller than a B2C target market.
A B2B business often serves a narrower pool of company buyers. A B2C business can serve a much larger pool of individual consumers.
2. Try Market Segmentation
Once you define your market, you can move on to market segmentation. Market segmentation is the process of narrowing a large market into smaller groups that share specific characteristics.
The data points you use to segment a B2B market differ from those for a B2C market. For B2B, you will mainly use firmographics. For B2C, you will use demographics, psychographics, geographics, and behavioral segmentation.
Segmenting a B2B Market Using Firmographics
Firmographics are a set of attributes used to segment an organization or business. The data points for B2B market segmentation include:
Company profile
Create a profile of the companies most likely to buy your product or service. Note the number of employees, years in business, and ownership status. You can also note the company’s size, number of branches, and the products or services it sells.
Industry
Determine the industry and sector of the businesses that buy from you. Are they in food manufacturing, e-commerce, or logistics? You may find that most of them are in a similar sector.
Market Size and Location
Identify the location of the businesses and their market size. Do they sell locally, nationally, or globally? Once you know the location, you can note other details, like language and culture in that area.
Customer type
Identify whether the business is B2B, B2C, or B2B2C.
Here are other data points you can include in your B2B market segmentation:
- Risk level – Is the business willing to take risks by buying new equipment or trying new systems?
- Organization structure – How many departments does the business have? Do layers of approval slow down its meetings and decisions?
- Growth trends – How is the business growing?
- Technology stack – What software and tools does the business already use? This is called technographic segmentation, and it can help you spot companies ready for what you offer.
- Buying signals – Has the business shown interest through actions like visiting your pricing page or filling out a form? This is called intent-based segmentation.
A B2B target market is usually smaller than a B2C target market. It may include just a handful of companies that share similar attributes.
Segmenting a B2C Market
The factors to consider when segmenting a B2C market include:
Demographics
Demographics is a good starting point for segmenting a B2C market. Demographic segmentation describes your customers based on attributes like age, gender, education, and ethnicity. You can also add:
- Family structure
- Life stage
- Income
- Employment status
Here are three examples of demographic segments:
- Men aged 30 to 40 who are in a relationship and ready to settle down
- Women aged 20 to 25 in their first job, earning $2,500 or more a month
- Men aged 40 and up earning a high salary with plenty of disposable income
Psychographics
Psychographic segmentation describes a market based on customers’ personal qualities. This method looks at attributes such as:
- Interests and hobbies
- Attitude
- Lifestyle
- Likes and dislikes
- Leisure activities
Geographics
You can also use geographics to segment your B2C market. Geographic segmentation divides your total market into groups based on location and zip code. This method is helpful when a business operates nationally or globally.
It is also useful when a product is weather-dependent. For example, say your company sells cold drinks. You may segment geographically to see which areas are hottest and where demand is highest.
When segmenting geographically, you can also include:
- The type of environment (rural, urban, or suburban)
- Language and culture
- Time zone
Behavior
The last data point to check when segmenting a B2C market is behavior. Behavioral segmentation looks at a customer’s actual actions, like purchasing habits.
For example, you may find that your target customers love buying self-help books. If you own a bookstore, you can stock more self-help books to attract these customers.
How to Collect Data for Market Segmentation
1. Study Your Current Customers
One way to gather information about your target market is to study the customers who buy your products and services. You can track them over a set period, such as six months.
Note their demographic details, like age, gender, and education. You can also hand them a quick survey once they purchase from you.
2. Collect Data Through your Marketing or Sales Team
You can also ask your sales team to gather information about customers. They can ask a few survey questions and note any common characteristics they see.
3. Use Analytical Tools
Analytics tools like Google Analytics 4 (GA4) can help you gather information about your customers. If you own an e-commerce shop, you can use a tool like this to see where your customers are located and how they found your website.
Once you collect data about your target market, analyze it for common characteristics. Use these commonalities to build customer personas and group them into segments.
The segment that buys your products or services the most is probably your target market.
Key Points and Facts About Target Markets
- A target market is the group of people most likely to buy your product or service.
- A target audience is a smaller segment of your target market that you target for one specific campaign.
- B2B and B2C target markets require different research tactics and different segmentation data.
- B2B markets are segmented mainly with firmographics, such as industry, company size, and technology stack.
- B2C markets are segmented with demographics, psychographics, geographics, and behavior.
- A typical B2B purchase now involves 8 to 13 stakeholders, according to Gartner’s 2023 research.
- You can research your target market by studying current customers, using your sales team, and using analytics tools like GA4.
Action Steps for Identifying Your Target Market
Define Your Market Type
- Decide whether your business is B2B or B2C.
- Note how this affects your marketing approach, from messaging to the number of decision-makers involved.
Segment Your Market
- For B2B, gather firmographic data: industry, company size, ownership, technology stack, and buying signals.
- For B2C, gather demographic, psychographic, geographic, and behavioral data.
Collect the Data
- Study your current customers over a set period, such as six months.
- Ask your sales team to note common characteristics they hear from customers.
- Use an analytics tool like GA4 to track visitor location and behavior on your website.
Build Your Target Market Profile
- Group your findings into common characteristics.
- Create customer personas from these groups.
- Choose the segment that buys the most as your target market.
Checklist for Identifying Your Target Market
- Identify your market type
- Confirm whether you are B2B or B2C.
- Choose your segmentation approach
- B2B: firmographics.
- B2C: demographics, psychographics, geographics, and behavior.
- Gather your data
- Study existing customers.
- Survey customers and sales staff.
- Pull data from an analytics tool like GA4.
- Define your target market
- Group your data into common characteristics.
- Confirm which segment buys the most from you.
- Apply it to your marketing
- Choose marketing channels your target market actually uses.
- Tailor your messaging and product decisions to what they want.
FAQ: Target Market
What is a target market?
- A target market is the group of people most likely to buy your product or service.
What is the difference between a target market and a target audience?
- A target audience is a smaller segment within your target market that you focus on for one specific campaign or promotion.
How is a B2B target market different from a B2C target market?
- A B2B target market is usually smaller and is segmented using firmographics. A B2C target market is usually larger and is segmented using demographics, psychographics, geographics, and behavior.
How many people are usually involved in a B2B buying decision?
- Gartner’s 2023 research shows the typical B2B buying group includes 8 to 13 stakeholders.
How do I collect data about my target market?
- You can study your current customers, ask your sales team for common characteristics they notice, and use an analytics tool like GA4.
Conclusion
Your target market is made up of the customers who have the most use for your product or service. Strive to identify your target market so you can tailor your products to what they like.
The best way to understand your target market is through market segmentation. This means narrowing your total market into smaller groups that share characteristics.
The attributes you use to segment a B2B market differ from those for a B2C market. For B2B, firmographic segmentation works best. For B2C, use behavioral, demographic, psychographic, and geographic segmentation.
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