Do you have a great idea? No matter how amazing it is, it isn’t enough for you to believe in it. As an entrepreneur, you can plan for success by understanding the target market for your product.
What is the purpose of a target market? How can knowing your target market help you avoid mistakes? Here’s a crash course to help you understand the types of target markets in business.
What is a Target Market
Simply put, the target market for your business is the group of people most likely to buy what you’re selling. People are your target market, and as a unit, they will have some things in common. Think about who the “typical customer” for your business will be. Consider this person’s:
- Sex: Is your customer male or female?
- Age: Are they college-age? Middle-age? In the golden years?
- Income level: Do they have lots of disposable income or very little?
There are other factors within a target market, such as race, parental status, marital status, education, and occupation.
Knowing your target market can help your business clearly articulate why it exists. Many businesses solve a problem or fill a need the customer didn’t know they had. Here are some examples you’re probably aware of:
- Amazon Fresh, DoorDash, and Hello Fresh provide the need for food with the convenience of saving time.
- Life Alert solves the problem of peace of mind for senior citizens needing medical help.
- 1-800-Flowers solves a problem for men on Valentine’s Day: the need to give a wife or girlfriend a romantic gift.
What is the Purpose of a Target Market
Knowing your target market can help you avoid wasting money on ineffective marketing campaigns. It can help you understand the needs and desires of your customers and even make changes to your product if necessary.
For example, if your customer is college-aged men, it would be foolish to use a marketing campaign geared toward women in their 40s. Alternatively, if your product is in a price range that only affluent customers can afford, it would be wasteful to market it to people with little or no disposable income.
Knowing your target market can help you know how to best reach the people most likely to buy your product. Having a strong grasp on who your customer is can even help you with other aspects of the business, such as designing your store or making decisions on how to promote the product.
Demographic segmentation is an attempt to understand your market on an even deeper level. For example, you could conduct market research to find out how your product is perceived by sex: do men and women view your product in the same way? Or using the demographic of age: is your product viewed just as favorably among Millennials and Boomers?
You could also use the family structure as a demographic. Do married households with children view your product just as favorably as single households without children? These are just a few ways you can split your potential customers into different demographics to find out how favorable your idea is. And, who to target your idea towards.
Do you want to expand your business beyond your local area? Do you want to go global? If so, it’s important to be aware that different regions of the country, and different regions of the world, may require different marketing strategies. What may be strange or unusual in one part of the world may be customary and normal in another.
For example, in your area, it might be typical and common for people to drive to work every day. So, you decide to show ads showing people driving to work every day. But, your ad will miss the mark if you show it in a place where people don’t own cars. And, where driving is an exception rather than the rule. Knowing the culture of your customers is essential.
This rule of knowing culture extends to other geographic differences. This includes things such as the language spoken, the food that is considered normal, and even the religion that is dominant. All these things may influence how your product is received by the public.
Do your thoughts and personal beliefs influence how you shop? Psychographic segmentation tries to answer the questions of what customers believe and value.
Consider how beliefs and values might impact your business:
- Holidays can vary, and many are rooted in religious traditions. These holidays can greatly influence how and when people spend money.
- Some people eat meat and animal products. Others do not.
- The perception of how a company is treating its employees or treating the environment can be very important to some consumers.
How these issues are perceived by a consumer can give insight into their values, beliefs, and preferences. Companies that specialize in Grade-A red meat don’t attempt to target vegan customers. In a similar manner, companies that identify themselves as green, environmentally friendly, or sustainable know that their values are part of the calling card that appeals to customers with those values.
Behavioral Market Segmentation
Behavioral market segmentation is a strategy that involves dividing a market into different groups based on consumer behavior. This means that the focus here is on behaviors like their buying patterns, product usage, and other behaviors related to their decision-making process.
Unlike Psychographic segmentation, behavioral segmentation focuses more on actions instead of thoughts and beliefs. This type of market segmentation is a way to identify and understand the needs, preferences, and motivations of different customer groups.
This approach allows businesses to tailor their marketing efforts and product offerings to meet the specific needs and interests of each segment. This can potentially lead to increased sales and customer loyalty. By segmenting the market based on behavior, companies can create more effective marketing campaigns that resonate with their target customers.
Firmographic Market Segmentation
Firmographic market segmentation is a strategy that focuses on segmenting groups based on the characteristics of companies or organizations. By segmenting the market based on firmographics, companies can more effectively target their marketing efforts and products to meet the specific needs and interests of each segment.
For example, a company that sells office supplies might segment its market by company size, targeting small businesses with different messaging and product offerings than it uses for larger corporations.
There are a few common factors used in firmographic segmentation:
- Industry Type
- Company Size (number of employees)
- Job Titles
- Company Structure
- Annual Revenue
Firmographic segmentation can help companies identify which segments of the market offer the greatest potential for growth and profitability. Also, it helps companies more effectively allocate their marketing resources and sales efforts.
Bringing a new idea forward can be exciting. Having customers believe in your product is essential to making the process profitable. Understanding the types of target markets will help you identify the people most likely to want or need what you’re selling.