How to Define and Analyze Your Target Market
To create happy, loyal customers, small businesses need to know who they are. Not everyone who buys your products or services will fit the same profile, but it’s far more effective to focus on a core customer base than spread the net too wide. Beyond helping you streamline your offering, it equips you to give those customers the best possible experience.
Understanding your target market
Another way to describe your core customer base is your ‘target market’. These are the people whose desires, values and needs most closely align with what your business can offer them. Ultimately, they’re already looking for what you have. Understanding your target market requires research over assumption. It’s about trying to grasp on a much deeper level who those people are, what motivations they’re driven by and how you can reach them.
Demographics such as age, gender, education level, occupation and family situation give you a broad idea of their lifestyle. Beyond this, consider the minute detail of their daily lives. Where do they work? What gives them enjoyment outside of work? What are their goals in life? The answers to questions like these help you create an authentic understanding of who they are instead of relying on a hunch.
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How to determine your target market
Hoping for a certain demographic or using guesswork won’t help you determine your target market. It requires an in-depth review of your products and services, the behaviour of existing customers and the marketplace as a whole. Breaking down the process will give you focus, direction and maximum insight.
Analyse your offering
What do your products and services solve? In turn, to whom do they appeal and why? Try to be as granular as possible when you’re answering these. For example, a gardening business helps people manage their outdoor space. If that business is based in a city, its services become specifically useful for busy professionals wanting to make the most of limited space, and people without the means to travel to out of town garden centres.
It’s important to drill into the detail when you’re running this analysis. Make note of everything you stumble across — the niches and finer points will be crucial in giving your business a unique edge against competitors.
Conduct market research
Analyzing your target market goes beyond understanding your customers — you also have to understand the marketplace. Analytics tools like Quantcast, Alexa, and Google Trends give you a comprehensive view of the landscape by identifying and assessing competitors, helping you find new customers, and enabling you to determine ways to improve.
Well-known sites like Canada411 help you see what competition exists in your business’s locale — and don’t underestimate the power tools like surveys, focus groups and in-person discussions. These are a great way to tap into the mindset of people who are already buying from your company or competitors: what they need, why they are (or aren’t) shopping with you and what you can do to make your offering more appealing.
With an integrated POS system you can also look into the specifics of what people are buying from you, when and how often.
Create customer profiles and market segments
Market segmentation is the process of organizing a group based on various categories, like demographics and psychographics.
As discussed earlier, demographics describe the more surface-level, baseline characteristics, like age, gender, education level, ethnic background, and marital and family status. Psychographics, on the other hand, offer a deeper look into who people really are, like behaviors, values, personality, and lifestyle.
It’s important to consider both demographics and psychographics when trying to conduct a full analysis of your target market.
Assess the competition
Use the online tools discussed above to get a comprehensive view of the competitive landscape. What are the businesses that offer comparable products and services? How much do they charge? What are they doing differently?
Unless you believe you have a significant advantage, avoid going after the same customer, especially in a small market where your competitors’ businesses are well established.
Create customer profiles and market segments
Market segmentation is the process of organizing a group based on various categories, such as demographics and psychographics.
Demographics describe the more fundamental characteristics of a person, like their age, gender, education level, ethnic background and marital or family status.
Psychographics offer deeper, psychological insights into who people really are as individuals, like their behaviours, values, personality and lifestyle.
You’ll find yourself with more accurate segmentation and profiling when you consider both demographics and psychographics in your analysis.
Assess the competition
Use the online tools discussed above to get a comprehensive view of the competitive landscape. Who are the businesses offering comparable products and services? How much do they charge? What are they doing differently?
You could create a SWOT analysis chart to demonstrate weaknesses, strengths, opportunities and risks for both your business and theirs. This will give you a good idea of what improvements you can make, and where you’re excelling already.
If you’re going after customers in a densely competitive space, make sure you’re well aware of your USPs. It’s harder to succeed when you’re contending with numerous others, so thoroughly develop an understanding of how why you excel above them.
Using your target market analysis
Once you’ve completed your analysis, put that data to work. Here are some ways to use the insight you’ve gathered to grow and improve your business:
If your analysis exposed holes in the market, plan how new services and products or an improved subset of your existing offering can plug them.
Did you identify an underserved group? Instead of going after the same customers as your competitors, explore these untapped markets.
If you identify underserved areas while assessing your local market, you might consider franchising or adding a new location.
If the insights into your competition reveal that you’re either pricing yourself out of the market or not charging enough, use comparative data to determine competitive prices or deals.
There is such a thing as offering too many options, and it can confuse and deter customers. Try specialising more instead. If you offer many of the same items as your competitors (especially if they aren’t big sellers anyway), pare down your inventory to focus on top-selling and exclusive items.
Your target market should be the foundation of your marketing strategy. Use what you know to determine which channels and messages to use when communicating with customers. Whenever you think about implementing something new, whether it’s a social platform or a promotional campaign, check your analysis to see if it’s likely to reap a positive response.
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