How much do you know about your target market? Are your marketing efforts relevant to potential customers? Like it or not, your products or services won't appeal to everyone. As an entrepreneur, you must define your target audience and market your products to the right people at the right time in the right context.
Target Market vs. Target Audience
First of all, make sure you understand the difference between a target market and a target audience. These terms are often used interchangeably, but they mean slightly different things.
A target market is a well-defined group of customers who may be interested in your product or service. For example, a company may offer gym apparel for men between ages 20 and 40. Its target market may consist of fitness enthusiasts who keep up with the latest fashion trends and have an above-average income. These customers are most likely to buy from your brand.
A target audience, on the other hand, is a specific group of customers you want to reach in general through online ads, promotions and marketing campaigns. Returning to the previous example, you may set up an online advertising campaign for a local store opening. This time, you'll try to reach fitness enthusiasts age 20 to 40 living within five miles of your new store, for instance. Basically, a company's target audience is a subset of its target market.
"Everyone" Is Not a Demographic
Whether you sell consumer electronics, clothing or high-end goods, it's critical to define your target market. Your products or services won't please everyone no matter how great they are. By identifying a target market, you will be able to reach them more effectively and maximize your advertising efforts via a marketing strategy. This will result in a higher return on investment and give you a competitive advantage.
Let's say you're offering something everyone needs, such as house-cleaning products. Some customers try to spend as little as possible on these goods. Some prefer popular brands and are willing to pay a higher price. Others are looking for specific types of house-cleaning products, such as organic or multi-surface floor cleaners.
As a small business owner, you may lack the budget and resources to develop dozens of products in each category. If, say, you're selling organic house-cleaning supplies, then you need to focus on those customers who are most likely to buy your products. In this case, your target market may consist of customers who care about their health and the environment, have an above-average income and prefer quality over quantity.
Another example is organic food. According to a 2018 survey, nearly 30% of those who buy organic food products are between the ages of 18 and 29. Another survey conducted by Pew Research Center found that consumers who purchased organic foods did so for health reasons (76%) or to protect the environment (33%). Marketers use these statistics to create targeted advertising campaigns that appeal to each group of customers.
Is a Target Market Necessary?
Whether you want to start a small business or enter new markets, you must first identify your target customers. The people who are most likely to buy your products will exhibit similar characteristics in terms of age, income, education level, lifestyle and more. Location is important too, especially for brick-and-mortar businesses.
The success of your branding and marketing efforts depends largely on your ability to convey your message to the right customers. As a small business, you may not be able to pay thousands for big advertising campaigns. Even if you do, the money spent on poorly targeted campaigns will go to waste. That's why it's important to define your target market and then craft specific messages for each target audience.
By doing so, you will create accurate buyer personas and determine which customers are most and least valuable to your business. Furthermore, you will be better able to fill a gap in the market and address customers' needs. Identifying your target customers can also make it easier to assess the viability of new products or services and validate your business idea. On top of that, you will allocate your resources more effectively, drive customer loyalty and get the most out of your marketing budget.
Defining Your Target Market
There are various ways to define your target market, such as looking for customers with similar needs and wants. Even when you are marketing your products to millions of people, imagine that you're still speaking to a single person. Think of your target market as an individual entity with highly specific needs. Rolls-Royce, for example, appeals to wealthy customers who care less about price and more about luxury and prestige.
First, think about your product and the problems it will solve. Next, try to determine who is most likely to experience those problems. Group your potential customers by age, gender, income, location, profession and buying power. Consider the following factors as well:
- Education level
- Marital status
- Ethnic background
- Hobbies and interests
- Attitudes and beliefs
- Religious affiliation
- Buying patterns
- Degree of loyalty
- Buyer bargaining power
- Substitute products
The bargaining power of buyers, for example, is strong when several other products similar to yours are available on the market. The same happens when customers can purchase the desired goods in bulk, or the number of buyers is smaller than that of suppliers. In this case, customers can pressure the suppliers to offer higher-quality goods at lower prices.
If that applies to you, it's important to further narrow down your target market. Try to address specific pain points that may have gone unnoticed before you refined your audience. Create detailed profiles for each group of customers based on demographics as well as on psychological, behavioral and geographic factors. If possible, try to identify underserved markets or niche markets.
What Is Market Segmentation?
A target market can be further divided into smaller groups of prospects with common attributes. This process is called market segmentation. For example, if you sell sports supplements, your target market consists of men and women who work out regularly and care about their health. You can further divide this market into groups of people who want to lose weight, build muscle or recover quicker from training.
Each group can be divided into several other groups by gender, preferences, health goals and so on. For instance, you could market some of your products to women age 30 to 45 who wish to get in shape after pregnancy.
The goal is to identify potential customers who are likely to bring the most profit or segments that have growth potential. Consider your company's resources and objectives as well as the size, growth and structural attractiveness of the market segments identified.
Types of Market Segmentation
Most marketers use demographic segmentation because the goods consumers need and their buying power depend largely on where they live. You can also segment your market based on the lifestyle, interests and personality traits of consumers.
There are four main approaches to segmentation, and choosing one depends on your budget and business goals. These include:
- Mass marketing (zero segments)
- Segmented marketing (two or more segments)
- Niche marketing (one or more specific segments)
- Micromarketing (hundreds or thousands of highly specific segments, such as customers living in a specific neighborhood)
A less-common approach is individual marketing, or one-on-one marketing. Companies that use this strategy customize their offers and marketing campaigns for each customer. Commercial interior designers, for example, tailor their services (and prices) for each and every client. Furniture stores may create custom pieces on demand.
Primary vs. Secondary Target Market
Few companies sell their products or services to just one target market. Most businesses also serve a secondary target market that shows growth potential. Let's say you're selling high-end smartphones with advanced features for business professionals — that's your primary market. However, your products may also appeal to technology enthusiasts such as software developers — that could be your secondary market.
A library that specializes in children's books, for example, will market its products to toddlers, but most times, parents are the ones who purchase books for their kids and therefore are a secondary market. As a business owner, you want to create ads and marketing campaigns that appeal to both children and their parents.
When it comes to advertising, you have two options. Choosing one depends largely on your budget and the types of products you offer. You can either set up marketing campaigns targeting both your primary and secondary markets or create individual campaigns for each. The latter option involves higher costs but allows you to better target each group of customers and expand your market reach.
Get to Know Your Customers
The key to effective market analysis is to gather as much data about your prospects as possible. Third-party data sources come in handy when you need to define buyer personas, segment your market and anticipate customer needs. Be aware, though — if your target market includes European Union consumers, make sure that data is collected according to the General Data Protection Regulation.
There are several ways to collect customer data, such as:
- Focus groups (conduct group discussions and Q&A sessions to get direct feedback from small groups of potential clients and current customers)
- Interviews (online, by phone or face to face)
- Surveys, polls and questionnaires
- Credit bureaus
- U.S. Census Bureau
- Marketing service providers
- Your competition
- Website activity
- Social media
- Online tools (Quantcast, Google Trends, GlobalWebIndex, Simply Analytics, etc.)
For example, you may use website data to determine from where your visitors come, which pages get the most traffic and which ones have the highest bounce rates. Another strategy is to set up three or more Facebook advertising campaigns for different target audiences, conduct A/B testing and see which ones have the highest conversion rates. This way, you'll get valuable insights on your audience and create more effective marketing campaigns.
Choose the Right Strategy
Some of these methods are more insightful than others. Qualitative research, for example, is commonly used in market research studies and consists of in-depth interviews, focus groups and more. Quantitative research, on the other hand, involves surveys, small-scale questionnaires and interviews, observations, longitudinal studies and other techniques. Generally, marketers use qualitative research to gain insights on customer behavior, opinions and motivations.
Another good source of customer data is your competition. Try to determine whom your competitors are targeting and how they reach their audience. Check out their websites, social media pages, online ads and performance reports. Seek ways to fill the gaps they've missed with their advertising efforts.
Remember that your work doesn't end here. The technology and economic conditions are constantly changing, which makes target-market research an ongoing process. Keeping up with these changes can help your company stay relevant and competitive. Depending on the nature of your business, you may need to repeat these steps every few months or every few years.
- Investopedia: Target Market
- Statista: Share of Americans Who Prefer Buying Organic Food Products in 2018, by Age
- Pew Research Center: Americans’ Views About and Consumption of Organic Foods
- Marketing-Insider: Market Targeting - Target Segments Efficiently and Effectively
- Forbes: Find Your Customers With a Target Market Analysis
- Hurree: Market Segmentation
- International Journal of Humanities and Social Science: The Four Factors for Targeting an Attractive Market