Any business wanting to grow is always deliberating over how to best promote and reach new customers or to boost revenue from existing customers. For marketing to be truly effective, it is important that your business has a clearly defined target market.
Knowing your target market is one of the fundamental building blocks of marketing. It is essential for any business to have this as part of its Business Plan.
One of the classic mistakes an entrepreneur can make is not having a proper understanding of who their customers are and what will really motivate them to purchase from the business.
If you ask many entrepreneurs who their customers are, they will say “everyone.” No business can effectively market to everyone.
Have you ever seen a Coca-Cola advertisement on TV featuring a group of 80 year olds drinking Coke? Doubtful. That’s not to say that 80 year olds never drink Coca-Cola, but merely that they are not the target audience.
What is a Target Market?
A target market consists of a group of customers (people or businesses) to whom the seller directs a marketing strategy or program. It is difficult to create an effective marketing program if you don’t understand the needs, wants and desires of your core customers.
You may also have a few different strategies for different target groups. At our education business, Wealth with Purpose, we have three distinct target markets. There are some overlapping characteristics but for the most part they are different. Our target markets are:
- Individual Christians (including couples)
- Christian Entrepreneurs
- Church Leaders
You will notice that the first group, individual Christians is very large; so we break this down further into:
- Young Adults (18-35)
- Married Couples
- Pre & Post Retirees (50+)
- Investors (those Christians with an interest in investing)
Identifying your Target Market
In order to reach them effectively and meet their needs or wants, you must first know your customers:
- Do you know their demographics? What can these customers afford to pay for your products or services? What would be their reason(s) for buying from you?
- What are the psychology and motivations of this group of people; this particular target market? What are their likes and dislikes? What are their needs and/or wants?
- What is your picture of an ideal or non-ideal customer? Very often, it is just as an important to know whom you don’t want to deal with. Therefore, you don’t waste time and money trying to attract them in the first place.
It is the strategy that divides a broad target market into subsets of consumers, businesses, regions or another pre-defined category which have similar needs and priorities. Then, you are able to design and implement marketing strategies to target them.
You must determine their behaviour towards your product. What benefits can the product offer customers to make it desirable? What is the expected usage rate?
Market segmentation also involves finding the type of market you will be in as well as the size of the customer base.
Finally, you must identify the buying situation of your customers. What are their lifestyles? What can they afford?
Below are some of the different ways you can segment you customer base.
- Geographical Segmentation
- By Region
- By City and Size
- By Rural vs. Urban
- By Climate
- Psychological Segmentation
- By Personality
- By Lifestyle
- By Psychographic Factors
- Demographic Segementation
- By Age
- By Gender
- Stage in Family Life Cycle
- By Education
- Social Class
- Ethnic Background
There is no real limit to how you segment your potential customer groups. It is a crucial exercise to ensure you have a true understanding of who your customers really are and how to effectively communicate with them. It is particularly powerful for focusing marketing efforts around a specific ‘niche’. That is the group you really want to have as customers and can really benefit from your product or service.