How Can Small Businesses Identify Their Target Market?
Who is the ideal customer for your brand? What type of people are likely to see value in your products? What interests or priorities do you target? These are the questions that every entrepreneur must answer when trying to sell a product. So how do you find a target market?
Let’s take a step back and answer the first crucial question. What is a ‘target market’?
A target market is the customer base at which your products and services are aimed. Usually, it is the industry that you’re trying to target. For example, Appy Pie’s App Builder’s target market are businesses that want to create apps with minimum effort.
The target market of a business is usually who the product/service is designed around. Once your small business sets its eyes on targeting an industry, your market starts expanding towards each business in that industry.
A target market can also be filtered out by company size. For products/services that are common among industries, you can target organizations based on their size. For example, if you provide software that helps scale companies to accommodate a larger workforce, your target market will usually be new small businesses.
The success of your business comes down to how well you target the market you have set your eyes on. To understand how you can identify and target your market successfully, here’s what you need to do.
Identifying Your Target Market
Identifying your target market is not the hardest thing to do. You have an ideal customer in mind while creating or designing a product. However, to accurately assess and to get a more detailed idea about your target market, you can follow these four steps:
- Analyze Your Product or Service
The first step is looking at your product/service. Ask yourself a few questions to understand who might get value from your product. Here are a few basic questions to begin with:
- What need does it fill?
- What problems does it solve?
- Who would benefit from it most?
These can be followed by more detailed questions like:
- Can this product be used by someone else?
- How can I diversify this product in the future?
- What features are stopping it from being used by others?
These questions will give you the preliminary idea of what your product is and can be turned into. For example, if your business manufactures formaldehyde used in the tanning industry, you can further spread your business repackaging your formaldehyde as embalming fluid. This addition is possible only if you and your sales team ask yourselves these questions.
One drawback of product analysis is that it is akin to self-reflection. Product analysis is incomplete if done within the organization which is why we move on to the next step.
Study Your Competition
Analyze your competition thoroughly. Your competition will help you identify what markets you should target. You should be careful if you’re a new small business since it is likely your more established competitors also sell in markets that may be inaccessible to you.
There are other benefits to studying your competition too. You can find out their pricing strategies and undercut them to promote your business. Remember not to follow your competition blindly, but rather try and outdo them at every turn.
Segment Your Audience by criteria
There are many variables that your audience can be chose through. Divide your audience on either demographic, geographic, or behavioral patterns.
Here are some common ways to segment a market:
Research and Analysis
Finally, once your market has been narrowed down through the steps above, it’s time to research further. What marketing strategies you should use? Is your target market large enough for sustainable business? Now is the time to begin researching the market you’ve chosen.
Examples of Target Markets
Let’s take a look at some world-class companies and observe how they set up their target markets:
Nike offers products tailored for athletes and people who exercise regularly. They usually pander to these audiences but when observed closely their target market is more well-defined. They have two major segments they pander to:
- Young Athletes
The major demographic for Nike is youth aged 12-20. This demographic is more ‘physically active’. They are more likely to play sports and exercise and form a massive market for Nike. Nike engages with this market through advertising, associating with sports leagues, associations and landing endorsements with sports celebrities.
Nike was started by track athletes and runners. They originally used to resell running shoes bought from a Japanese company. Even today, shoes are their most major products and nearly 60-70% of their shoes are meant for running. They target people who are habitual runners.
Starbucks is the ‘go-to place’ of the current generation. From college hipsters to working professionals, Starbucks is the definitive coffee shop. The demographic audience of Starbucks is very well-defined.
- Working Class
Starbucks shops are designed to be contemporarily designed to appeal to this demographic.
Another target market for Starbucks are tech-savvy people. It is common to see people working while enjoying a coffee at Starbucks. To pander to such people, Starbucks provides various online services.
Starbucks tends to have outlets in urban working areas. You won’t find Starbucks at a highway dine in. Their target market is people in cities.
Apple’s target market is both B2C and B2B. Apple has a wide variety of audiences it targets. It can serve such a broad target market due to continuous innovations in product design. Apple may not be the most innovative in their hardware anymore, they still happen to lead product design and continuously crank out the wow factor with their products.
Businesses prefer Apple simply because their products are more convenient and save time. They also have a wide array of product offerings to support them. They have managed to create a technology company that creates both software and hardware.
That was it for how you can target your markets. Do remember that the target market for your organization should be defined even before your business is started. That begins with writing a good business plan. The relevant blog has been linked.