What is a Target Market?
Many businesses can’t answer the question: Who is your target market? They have often made the fatal assumption that everyone will want to purchase their product or service with the right marketing strategy.
A target market is simply the group of customers or clients who will purchase a specific product or service. This group of people all have something in common, often age, gender, hobbies, or location.
Your target market, then, are the people who will buy your offering. This includes both existing and potential customers, all of whom are motivated to do one of three things:
- Fulfill a need
- Solve a problem
- Satisfy a desire
To build, maintain, and grow your business, you need to know who your customers are, what they do, what they like, and why they would buy your product or service. Getting this wrong – or not taking the time to get it right – will cost you time, money, and potentially the success of your business.
The Importance of Knowing Your Target Market
Knowledge and understanding of your target market is the keystone in the arch of your business. Without it, your product or service positioning, pricing, marketing strategy, and eventually, your business could very quickly fall apart.
If you don’t intimately know your target market, you run the risk of making mistakes when it comes to establishing pricing, product mix, or service packages. Your marketing strategy will lack direction, and produce mediocre results at best. Even if your marketing message and unique selling proposition (USP) are clear, and your brochure is perfectly designed, it means nothing unless it arrives in the hands (or ears) of the right people.
Determining your target market takes time and careful diligence. While it often starts with a best guess, assumptions cannot be relied on and research is required to confirm original ideas. Your target market is not always your ideal market.
Once you build an understanding of who your target market is, keep up with your market research. Having your finger on the pulse of their motivations and drivers – which naturally change – will help you to anticipate needs or wants and evolve your business.
Types of Markets
The Consumer Market includes those general consumers who buy products and services for personal use, or for use by family and friends. This is the market category you or I fall into when we’re shopping for groceries or clothes, seeing a movie in the theatre, or going out for lunch. Retailers focus on this market category when marketing their goods or services.
The Institutional Market serves society and provides products or services for the benefit of society. This includes hospitals, non-profit organizations, government organizations, schools and universities. Members of the Institutional Market purchase products to use in the provision of services to people in their care.
Business to Business (B2B)
The B2B Market is just what it seems to be: businesses that purchase the products and services of other business to run their operations. These purchases can include products that are used to manufacture other products (raw or technical), products that are needed for daily operations (such as office supplies), or services (such as accounting, shredding, and legal).
This market can also be called the “Intermediary Market” because it
consists of businesses that act as channels for goods and services between 50
other markets. Goods are purchased and sold for a profit – without any alterations. Members of this market include wholesalers, retailers, resellers, and distributors.
Product / Service Investigation
The process for determining your target market starts by examining exactly what your offering is, and what the average customer’s motivation for purchasing it is. Start by answering the following questions:
- Does your offering meet a basic need?
- Does your offering serve a particular want?
- Does your offering fulfill a desire?
- What is the lifecycle of your product / service?
- What is the availability of your offering?
- What is the cost of the average customer’s purchase?
- What is the lifecycle of your offering?
- How many times or how often will customers purchase your offering?
- Do you foresee any upcoming changes in your industry or region that may affect the sale of your offering (positive/negative)?
• On the ground. Spend some time on the ground researching who your target market might be. If you’re thinking about opening a coffee shop, hang out in the neighborhood at different times of the day to get a sense of the people who live, work, and play in the neighborhood. Notice their age, gender, clothing, and any other indications of income and activities.
• At the competition. Who is your direct competitor targeting? Is there a small niche that is being missed? Observing the clientele of your competition can help to build understanding of your target market, regardless of whether it is the same or opposite. For example, if you own a children’s clothing boutique and the majority of middle-class mothers shop at the local department store, you may wish to focus on higher-income families as your target market.
• Online. Many cities and towns – or at least regions – have demographic information available online. Research the ages, incomes, occupations, and other key pieces of information about the people who live in the area you operate your business. From this data, you will gain an understanding of the size of your total potential market.
• With existing customers. Talk to your existing customers through focus groups or surveys. This is a great way to gather demographic and behavioral information, as well as genuine feedback about product or service quality and other information that will be useful in a business or marketing strategy.
Who is Your Market?
Based on your product / service and market investigations, you will be able to piece together a basic picture of your target market, and some of their general characteristics. Record some notes here. At this point, you may wish to be as specific as possible, or maintain some generalities. You can further segment your market to achieve even greater success.