Target Market: Newsletter
A popular and critical question
posed to business owners and entrepreneurs by lenders and investors is
"Who is your customer?"
It's such a simple question, yet the inability to
answer it has possibly caused more 'going out of business' sales than any
Why can failing to answer such a simple question
have such a devastating impact on your business?
many business owners place too much emphasis on their products and
services, and too little on what the customer truly wants and needs.
may have a great product, with more neat gadgets, features, and benefits
that your competition offers, but does your customer care?
And how do you
know they care?
The first place to start is by defining exactly who
would be interested in buying your product or service.
This is your target
market, defined as the group of the population sharing a common set of
traits, which distinguish them from everyone else.
For example, a children's clothing store located in
the mall might have a customer profile like this: Children between the
ages of 3 to 8 years old, 65% female and 35% male, located within 10 miles
of the mall, and whose parents earn over $40,000 a year.
characteristics define a target market - and a central set of
characteristics for potential customers for children's clothing.
in the start-up phase, your target market may be less tangible than the
target market for a company with years of operational history and customer
But as you gain experience running your business, and you maintain
accurate records of who actually purchases your product or service, your
understanding of your ideal customer will improve.
So why focus on your target customer?
First, if you don't understand who they are, how can
you tailor your product or service to best meet their needs?
One key to
business success is the ability to provide products and services that meet
the needs and wants of your customers.
If your customers want to purchase
red shoes, and all you sell are blue shoes, how many do you suspect you
If your customer believes that the speed of your service is
more important than its quality, isn't that information you need to know?
Second, when you understand who your customers is, you
can determine with more accuracy which marketing mediums and channels will
be most effective in reaching them.
If your potential customer only
listens to FM stations, and you advertise on an AM station, your marketing
efforts will be unsuccessful.
The more narrowly you can define your
customer, the more focused your marketing efforts become, and the more
your marketing dollars will work for you.
For example, if you want to sell print shop owners a
product, then advertising in a print industry magazine is a far more
effective use of marketing dollars than placing an ad in USA Today or
This doesn't mean that your customer won't read USA Today or TIME,
just that you won't be advertising to all the millions of people who
clearly have no interest in your product.
Here are suggestions on how to breakdown your customer
profile, on both the business and consumer level.
Demographic characteristics are specific, objective,
and observable characteristics that your target customers share.
marketing mediums, such as newspapers, magazines, radio stations and
television stations can provide excellent demographic characteristics on
General demographic characteristics include:
- Age or age range
- Income Level
- Family Life Cycle
- Race/Ethnic Group
- Social Class
- Product/Service Sold
- SIC Code
- Years in Business
- Number of Employees
Geographic characteristics are based on the location(s)
where your target customer can be reached.
Are they in the urban areas or
do they reside in the rural areas?
Are they in Montana or New York?
Correctly deciding whether to run an advertisement in the New York Times
or the Los Angeles Times, will save you money, and help you generate more
effective marketing results.
Try to identify your customer based on the
following geographic characteristics:
- Country / Region
- City / Town
- Size of Population
- Population Density
Psychographic characteristics, though less tangible,
are still important to identify and understand.
These traits have more to
do with a person's psychological characteristics such as attitudes,
beliefs, hopes, fears, prejudices, needs or desires, and are highly
dependent on your customers' self-image and their perceptions of your
industry or product.
Psychographic traits include such things as:
- Social Class
- Leader / Follower
- Extrovert / Introvert
- Independent / Dependent
- Conservative / Liberal
- Traditional / Experimental
- Socially conscious / Self-centered
Consumer / Behavioral characteristics are those
relating to the purchasing and usage traits of your customers.
Do they use
similar products such as yours, and how often do they use them?
the benefits people desire in your service, and how does this translate
Consider these consumer / behavioral traits for your target
- Usage Ratio
- Benefits Sought
- Method of Usage
- Frequency of Usage
- Frequency of Purchase
Once you determine who your customer is, it's important to identify the
size of your customer base.
Is it large or is it small?
If it's too large,
consider narrowing it down and focusing on a particular niche.
reach and sell a large target market is difficult and costly, especially
if it's populated by well-financed competitors who will force you to incur
significant costs to achieve a sizable market share.
If too small, will
you be able to capture enough customers to make a sufficient profit?
Once you define your customer, and determine their total numbers in the
population, it's a good idea to research the trends of your market.
the next few years, what growth rate can be expected for your target
What changes are taking place in the makeup of your market, and
how will they change in the future?
How are, and how will, customers
change their use of your product or service?
So you ask, "How do I find all this information?"
BizPlanIt has a few suggestions.
First, talk to as many of the people in
your target market as possible.
Seriously - just talk to them and ask
questions. Conduct surveys.
Discover what they like and dislike, and what
they want and need.
What is the most important factor in their purchase
Facilitate a focus group, or if you have the money, consider
working with a market research firm.
Second, don't forget the local library.
It's rich with
books, magazines, research journals, reference guides, and computer
databases to help you find the information you need.
Ask the librarian for
help, we always find them extremely helpful in locating specific sources
Lastly, use your own eyes and ears to discover
valuable details about your target market and their buying habits.
your competitors disguised as a consumer.
Hang out in a store related to
the product or service you sell and take it all in.
Request annual reports
and marketing information to find out about the financial, operational,
and marketing factors that are important in your industry.
look around, collect information, get organized, and figure out who your
target customer is, and how you will reach them effectively.