Every sales team and entrepreneur need to know their customer. Who is the ideal fit for your offering? What are their interests and priorities? Answering these questions can help you prioritize the deals you're most likely to win. But how do you find a target market and what exactly is it anyway?
What Is a Target Market?
A target market is a group of customers for which your products and services are aimed. It's usually first defined by an industry.
For example, if you've created a B2B Software product that helps remote construction teams, you'd probably focus on other companies within the construction industry. After all, that's who you designed the product offering around.
Once you have an industry lined up, it's time figure out size. Even within an industry, you'll have companies that are very large. The Fortune 1000 can dramatically move your business forward when they sign up, but they also take more time to close -- sometimes up to a year or more.
Smaller companies -- less than 100 employees -- move faster because they don't have as many formal processes in place. The downside is they usually don't have the same magnitude of resources to invest in your product.
How to Identify Your Target Market
- Analyze your product or service.
- Check out the competition.
- Choose criteria to segment by.
- Perform research.
1. Analyze your product or service.
Take a look at what you're selling so you'll understand which consumers would get value out of your product. The questions below will help with the brainstorming process:
- What need does your product or service fill?
- Are there any problems or pain points it solves for?
- Who would benefit most from your product or service?
2. Check out the competition.
Perform an analysis of your competitors to see who they're targeting. Take a look at their customer base and see if you can find an area of the market you could focus on that they might be missing.
3. Choose criteria to segment by.
A target market can be segmented by a few different variables. Consumers can be split by demographic, geographic, and behavioral factors.
Here are some of the most common ways to segment a target market:
4. Perform research.As you begin to narrow your market, it's time to research further. What marketing strategies should you use to reach your potential target market? Is the target market large enough for your product or service? Market research will help you figure out which target market.
Picking the right target market can tell you a great deal about your business. Are you looking to become a true velocity business, or do you see yourself as a steadier flow of pipeline with enterprises and consumers?
Target Market Examples
Let's take a look at some of the best-in-class companies -- both on the B2C and B2B sides -- to see how they set up their target markets.
1. Atlassian Target Market
Atlassian offers a suite of collaboration tools designed to help developers and product leaders take their projects from concept to completion. A quick look at their "Customers" page and you'll see they operate in several industries.
Atlassian, like most larger companies, uses target market segmentation to look at different markets and break up their unique value propositions, terminology, and values.
By diving into one segment, like retail, we see they're working with several large companies -- especially with their support-related products.
This tells us that while Atlassian can work with almost anyone doing software development, they recognize how their value proposition changes depending on the market segment in question.
Even the same product for two different customer types creates different levels of value.
2. Nike Target Market
Nike is a classic B2C example. They offer products to athletes and folks who want to exercise regularly. They offer apparel, equipment, shoes, and accessories.
They work with athletes and a fitness-minded audience, but we know a good target market definition can't be that broad. Let's break two of their segments down:
- Young athletes: Kids who get frequent exercise and play sports growing up are a huge, growing category for Nike. Nike engages with this market through sports leagues and associations and with endorsements from popular sports stars like LeBron James.
- Runners: With a focus on new types of shoes, Nike shows they target not just based on demographic information (age, location, career) but also based on lifestyle. Nike launches shoes and apparel designed to help the avid runner stay on the road a bit longer.
3. Starbucks Target Market
Next time you're sipping your cold foam Cascara cold brew, ponder the target market of the top coffee destination in town: Starbucks.
Many of their locations have been remodeled and offer a hip, contemporary look. Not that surprising since about half of their customers are between the ages of 25 and 40.
If you spend more than five minutes sitting and drinking your coffee, you'll probably here the barista's shout out "Mobile Order." The mobile transaction process now accounts for up to 30% of Starbucks' revenue which shows they're catering to a tech-savvy crowd.
The next clue we have on their target market is the location of their shops. By positioning their locations in heavy urban areas, Starbucks is attracting on-the-go professional. To recap, here are a few of Starbucks' target markets:
- 25-40-year-olds: Remodeled locations accommodate their largest demographic base
- Tech-savvy adults: Their mobile app has caught on and lends itself to a forward-thinking crowd
- Working professionals: Their urban focus tells us the type of lifestyle they're catering to
4. Apple Target Market
What about a company that has both consumer and business customers? How can they develop a target market with such a broad set of customers? Apple is the textbook case for innovation and product design.
But how does that apply to finding a target market? Thankfully, with their wide array of product offerings, Apple has a little something for everyone. Here are two of their target markets:
- Technology enthusiasts: A customer category that launched their brand decades ago, technology enthusiasts still get attention from Apple. With launches of new tech categories (wearables, Apple TV, HomePod, etc ...) Apple has shown they're still creating value for this segment. There is also a tremendous ecosystem play where owning a suite of Apple products enables better interoperability among your tech.
- Healthcare: One market Apple has its eyes on is healthcare. By focusing on the appeal of having information right at your fingertips with mobile and the iPad, they've positioned healthcare workers to more conveniently communicate with patients.
Apple doesn't seem to exclude many people from its target market and has positioned itself to benefit both consumers and businesses -- even with the same products (iPad).
Their success has been more about understanding the value of their different segments rather excluding people from them.
What can we learn about segments from Apple and the others generating value for their target customers?
A target customer is an individual that's most likely to buy your product. And it's a subset of the broader target market. For example, if your target market is female athletes between the ages of 13 to 25, a target customer could be female athletes in the specific age range of 13 to 16.
When you identify the customers you want to serve -- and the ones you don't -- ask:
- "Do my target customers have different problems they're solving with my product?"
- "Do my target customers get different value from my product?"
- "Are either of these things related to demographic, geographic, or lifestyle components?"
In order to segment effectively, you must have a decent way of measuring the value you provide to the market. Then, identify if certain groups are getting more value than others.
This will power the positioning of your product. Suddenly, you have the ability to pinpoint pain for your customers while speaking their language.
This helps you refine your position in the market and connect on a deeper level with your customer. Having a target market or target customer is all about relevancy and relating to the person on the other side of the cash register.
So, go ahead and make the leap. By learning more about your target customer, you'll unlock value you never even knew was there.
This ultimate guide to entrepreneurship can also help you on your road to developing your target market -- and the future of your business. Need more entrepreneurial inspiration? Check out this list of entrepreneur blogs to jumpstart your dreams.
Originally published Dec 3, 2018 6:01:00 PM, updated December 04 2018