One of the keys in business is to have a product or service that consumers actually want. Maybe you have a top of line hair salon, or you just opened shop to sell an all-new high tech cell phone accessory.
No matter what your core product or service is, it’s not a great business plan to try to appeal to everyone. Welcome to the world of target markets.
So what’s a target market?
We’re glad you asked. According to the Small Business Encyclopedia, a target market can be defined as “a specific group of consumers at which a company aims its products and services.” Sounds simple, right? Well, not exactly. Often times, business owners are very general in determining their target market, hoping to get a bigger slice of the pie.
Do any of these sound familiar?
If you own a salon, you might say your target market is anyone who has hair; if you’re selling phone cases, maybe you’d say your target is anyone with a cell phone. Here is where the hard truth comes in: even though you may want it to be, your target market is not everyone.
Of course, we wish it could be – wouldn’t it be great to have all those people buying your products or services, talking about you and helping you gain more business? In theory, having everyone be your target sounds great. In reality, no business no matter the size, can be everything to everyone.
Why do I need to know my target market?
Knowing your target market is the first step in determining who you market your products towards. Having a clearly defined target market provides guidance along the road of growth for your business and can help you improve your product or service based on feedback from actual customers. Without having a clear picture of who your target market is, you may be wasting time, money and energy on the wrong people, people who won’t even think about buying your product. If you are focusing all your efforts on the wrong market, you may be missing opportunities to increase sales or even losing sales to your competitors.
Why isn’t my target market everyone?
Simply put, not everyone is interested in what you have to offer, and no one product or service can be everything to everyone. Think of it this way: when determining who you want to market your product to, you may look at demographics (more on that later) as part of you research. However, “everyone” is not a demographic, nor a specific group of people. A target market is all about specific characteristics that your desired customers possess.
Another consideration is the fact that it just isn’t possible. Let’s consider this scenario. Imagine you wanted everyone in Fargo to be your target market. In 2015, the population of Fargo alone was estimated to be 188,523 according to the US Census Bureau. If all of these people were to order your product, it would be extremely difficult, if not impossible, to meet all their needs. In short, narrowing your target market can help your business be more efficient.
So, how do I determine my target market?
There are many criteria that can be considered in determining your target market. Market segmentation usually tends to fall into four separate categories.
- Geographic – This criteria of segmentation focuses on, you guessed it, people living in a certain geographic area. Looking at a geographic area allows you to see what the characteristics are of the people in the region your business operates in.
- Demographic – We told you we would come back to this! Demographic segmentation is an extremely important part in determining your target market. The demographic characteristics of consumers get down to the nitty gritty of who the person really is. Demographics commonly examined in target market determination include age, gender, income and level of education, to name just a few.
- Psychographic – Psychographic segmentation looks at the potential customers’ interests and personalities. Segmenting by psychographic qualities can give your business a good look into the daily life of the target customer by examining their attitude, lifestyle and personal values.
- Behavioral – If you guessed that this form of segmentation focuses on customers’ behaviors, you are correct! This can also refer to what potential customers desire from your offerings. This can include brand loyalty, user status, desired benefits, community involvement (numbers don’t lie) and the readiness of the buyer.
These four categories can be extremely helpful in determining your target market as they allow you to narrow down each category to the customers you feel best fit with your business.
Putting it all together
By this point in the blog, it should be no surprise that determining your target market is extremely important for your business. Having a clearly defined, reasonably sized target market can allow your business to put time and effort in to those who are interested in the business, and weed out the ones that just won’t bite.