How To Understand Your Target Market
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 a mass appeal, but it is unlikely everyone in the world wants or needs them. Your goal should be to find that group of customers most likely to buy your product or service. Or in other words, strive to identify your target market.
Understanding your target market means knowing your customer to the core. It means knowing what their wants and needs are, where they live, their age, gender, preferences, and so on. In this article, we will go over how to understand your target market to help 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 developing and positioning your product in the market.
Your target market is that consumer you think about when designing your product. All products and services are developed for a specific consumer. Few products are appealing to everyone in the world.
When creating your marketing plan or strategy, your starting point should be to identify your target market. Identifying and focusing your attention on that market will help your business increase its sales and, in turn, 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 or subset within the target market. A target audience is that group of customers in your target market that you want to attract for a specific marketing campaign or promotion activity.
For example, assume 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 sell your running gear to potential marathon runners. Your target audience will be marathon runners on that particular day or event and not all runners.
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 couple of 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 Jack knows this target market, he may 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 contains many businesses, companies, and apartment homes. Don’s gym has treadmills, dumbbell sets, stationary bicycles, stretching mats, and so on.
His gym can serve anyone living in the city. Don’s target market might be men and women aged 18 to 36 years who earn at least $25,000 per year and love to exercise, keep fit and stay active.
Everything Don does will be to improve the customer experience of this particular client group. He may play the music that they listen to or create ads geared towards them.
3. Target Market for a Coding Challenges Website
Lily manages a coding challenges website called LiliCode. Her website provides random code challenges to coders and software developers who want to polish their coding skills. Lily notices that the people who use her website are those trying to learn how to code instead of professional developers.
Lily may define her target market as men and women interested in learning coding and website development. She can introduce video tutorials and multiple example questions to help her customers learn better.
Why Is It Important to Understand Your Target Market?
Understanding your target market will enable you to reach out to your customers effectively. You can place your advertising and marketing messages where they are most likely to see them and use words that speak directly to them.
Knowing your target market allows you to choose the best marketing media channels and thus improve your marketing ROI. Going back to the first example, Jack may place his advertising in family and parenting magazines instead of business magazines. He knows that his target market is more interested in reading family magazines than business ones.
Understanding your target market also enables you to tailor your product and service to your customer wants and preferences. Looking at the previous hypothetical examples, Don plays music that his customers love so he can get them to work out in his gym. In addition to the code challenges, Lily provides video tutorials for her customers to learn from.
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? How do you identify those customers that use your product or service the most? The people in your target market usually have shared values and characteristics.
For example, they may be in the same age group or living in the same area, or interested in similar things. When researching your target market, your goal should be to pinpoint the common characteristics of your customers.
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 are different from those of a B2C market. The factors that guide a business to buy your product or service vary from those that drive an end consumer. Next, see how a B2B market differs from a B2C:
- A B2B market is price and logic-focused, while a B2C is emotion and behavior-focused.
When marketing to a B2B market, it’s best to use rationale rather than emotions. You may show the product’s affordability, its features, and how it benefits the organization. For end customers, you can tell them an emotional story about the product. Businesses don’t care much about stories, while customers may not look much into the price.
- Personal relationships are more important in B2B than B2C markets.
B2B contains long-term buyers who may need your product or service once or twice a month. B2B clients may want direct contact with you in case of anything. In B2C, the relationship is impersonal and mass-communicated. The company doesn’t necessarily have to know all customers or talk to them directly.
- In B2B markets, there is a lot of consultation.
B2B clients may have to hold meetings and discuss their budget before buying from you. In B2C, the end customer is the one who decides whether to purchase the product or not.
- A B2B target market is smaller than B2C.
The total market for B2B clients might be a couple of thousands. For B2C, it can be millions of customers.
2. Try Market Segmentation
Once you define your market, you can proceed to conduct market segmentation. Market segmentation is the process of narrowing down a large market into smaller groups that share specific data points or characteristics.
The data points you use to segment a B2B market are different from those of a B2C. In B2B, you will use firmographics to segment the market. For B2C, you will use demographics, psychographics, geographic, 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:
Create a profile for the companies that are most likely to buy your product or service. Write down the number of employees, years in business, and ownership status. You can also indicate the company’s size, the number of branches, and the products and services they sell.
Determine the industry and sector of the businesses that buy from you. Are they in food manufacturing, e-commerce, or logistics? You may find out 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 identify the location, you can determine other details like the language and culture in that area.
Identify whether the business is B2B, B2C, or B2B2C.
Here are other data points that you can include in your B2B market segmentation:
- Risk level – Is the business willing to take risks by buying new equipment and trying new systems?
- Organization structure – How many departments does the business have? Is the company bound to bureaucracy cause of meetings and decision-making?
- Growth trends – how is the business growing?
A B2B target market is not as big as a B2C. It may comprise of a couple of customers with similar attributes.
Segmenting a B2C Market
The factors to consider when segmenting a B2C market include:
Demographics should be your starting point for segmenting a B2C market. Demographic segmentation describes your customers based on attributes such as age, gender, education, and ethnicity. You can also add others like:
- Family structure
- Life stage
- Employment status
Here are three examples of a demographic segmentation:
- Men aged 30 to 40 who are in a relationship and ready to settle down
- Women aged 20 to 25 who are in their first job with a monthly income of $2,500 or more
- Men aged 40 earning a high salary with plenty of disposable income
Psychographic segmentation describes a market based on customers’ personal qualities. This method of segmentation assesses attributes such as:
- Interests and hobbies
- Likes and dislikes
- Leisurely activities
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 segmentation method is helpful when a business operates nationally and 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 the demand is highest.
When segmenting geographically, you can also include factors like:
- The type of environment (rural, urban, or suburban)
- The language and culture
- Time zone
The last data point that you can check when segmenting a B2C market is behavior. Behavioral segmentation assesses the customer’s actual behaviors like purchasing habits. For example, you may find out that your target customers love to buy 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 that buy your products and services. You can analyze them over a certain period, for example, six months. Note down their demographic characteristics like age, gender, and education. You can also hand them a quick customer survey once they purchase from you.
2. Collect Data Through your Marketing or Sales Team
You can ask your sales team to gather information about the customer. They can ask the customer a few survey questions then take note of common characteristics.
3. Use Analytical Tools
Analytical tools like Google Analytics can help you gather information about your customers. If you own an e-commerce shop, you can use this tool to identify attributes like the location of your customers and how they found your website.
Once you collect data about your target market, analyze it to find common characteristics. Use these commonalities to develop customer personas and group them into segments. The customer segment that buys your products or services the most is probably your target market.
Your target market comprises customers who have the most use for your product or service. Strive to identify your target market so that you tailor your products to what they like.
The best way to understand your target market is through market segmentation. Market segmentation involves narrowing down your total market into smaller groups that share characteristics. The attributes you use to segment a B2B market are different from those of a B2C. In B2B, it’s best to use firmographic segmentation. While in B2C, you can use behavior, demography, psychographic and geographic segmentation.
A book is a great way to expand your knowledge in regards to understanding your target market. In addition, you can read and learn at your own pace, which is beneficial compared to taking a class where you’re constricted by time.
When I’m interested in the topic, I’ll look for books and browse through the table of contents for an overview.
For the latest books related to understanding your target market, see the latest Google search results.
Taking a course can be beneficial to improving your knowledge and understanding more about your topic.
The way you use a course can vary depending on your needs and learning style. For example, you may like to skim through parts of the course you are familiar with and go into depth for the areas you want more information about.
Another consideration for taking a course is ensuring you’re getting a course with a reputable author. Anyone can create and publish a course, but you want someone knowledgeable so that you know you’re getting the right information.
There are many courses online related to defining your target market. One tip is to check out the reviews from people who have already taken the course, so you get a sense of how good the information and presentation are. In addition, you can take a few minutes to see the latest Google search results related to courses about defining and understanding your target market.
The news is another excellent source of knowledge. Topics covered by news networks across the world are deemed noteworthy and may be significant.
Although watching the nightly news to gather information on a subject is impractical, you may narrow your search using Google’s news search option. You may discover both current information and archives.
YouTube is a great channel for information related to virtually any topic. For example, in the amount of time it would take to read a chapter in a book, you can go through five to ten short videos that offer various perspectives and give you a broader overview of the topic.