How to Define and Analyze Your Target Market
To best serve your customers, you have to know who they are. Of course, not everyone who buys your products or services fits the same profile, but as a company you should have a core customer base in mind. Not only does it help you streamline your product offerings, it also allows you to give those customers the best possible experience.
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Understanding your market
Another way to describe your core customer base is your target market. These are the people you think are the most suited to your products and services, so it’s essential that you understand them.
Understanding your target market is different from just making assumptions about it. Instead, it’s about really trying to figure out its needs and motivations. Demographics such as age, gender, education level, occupation, and family situation can help you determine what your customers need and what they’re willing to spend.
Beyond this, you should also consider who your customers are as people. What do they value? What is their lifestyle? What do they enjoy doing with their spare time? The answers to these questions can help you understand your target market on a deeper level.
How to identify your target market
Determining your target market isn’t as simple as guessing who your customers are, or hoping for a certain demographic. Instead, it requires an in-depth review of your products and services, the marketplace, your potential (or current) customers, and more.
Here are some tactics to help you:
Analyze your offerings
Ask yourself what problems your products and services solve, and, in turn, to whom they appeal. For example, if you operate a landscaping business, your services would be attractive to homeowners with lawns and, more specifically, people who are too busy to care for their yard and can afford to pay someone to do it.
So, your target market would include higher-income adults with demanding jobs and/or children, who don’t have time for or interest in lawn care but still want it to look good.
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.
And check out the U.S. Small Business Association’s SizeUp tool, which (as the name implies) helps you size up the competition in your market by providing data like other nearby businesses that offer similar services and local consumer spending in that category. The U.S. Census Bureau’s site, though a bit unwieldy, can serve as another helpful resource for finding local demographic information like education level, income, and household size.
And don’t forget that some of the most helpful data can come from both existing and prospective customers. Tools like surveys, focus groups, and in-person discussions can help you understand what your target market needs, why it is (or isn’t) shopping with you, and what you can do to make your offerings more appealing. You can also look at data from your POS or CRM to glean insights about your customers.
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.
Using your target market analysis
Once you’ve completed your analysis, put that data to work. Here are some ways to use the information to grow and improve your business.
Product development: If your analysis helped you identify some holes in the market, you can use this information to create products and services that your target market needs.
- Niche markets: Did you identify an underserved population? Instead of going after the same customers as your competitors, explore untapped markets.
- Expansion opportunities: While assessing your local market, you might identify underserved areas. This is valuable information if you’re considering franchising or adding a new location.
- Pricing strategy: While assessing your competition, you might have found that you’re either pricing yourself out of the market or not charging enough. Use comparative data to determine a fair price.
- Curation: There is such a thing as offering too many options, and customers don’t like it. If you offer many of the same items as your competitors (and they aren’t big sellers anyway), pare down your inventory to focus on top-selling and exclusive items.
- Marketing: Your target market should be the foundation of your marketing strategy. Use what you know to determine what channels you should be using to communicate with your customers and what messages work with them. Whenever you think about implementing something new, whether it’s a social platform or a promotional campaign, check your analysis to see if it resonates.