Welcome to the third installment of my Small Business Mistakes Blog Series. You can read the Introductory post here (with links to over 40 great business sources at the end) and my second post about Failing to Validate your Business Idea here. I will post at least one in the series each week until I get through all 10 on my list – so stick around!
What is a Target Market?
A target market is simply the group of people to whom you are trying to sell your product or service. If you don’t know your target market then how could you possibly understand how to sell to them? If you don’t understand where they hang out, what they read, where they shop and what products and services they currently buy, how could you possibly know how to reach them? Short answer; you can’t.
Validation and Target Market
In my last post, I wrote about validating your business idea to your target market. But how and when do you determine your target market? The best way to explain is by example. Looking at these next four examples of new businesses, you’ll immediately see that validation and target market are inextricably intertwined.
- Dan discovered a solution to a problem that many people deal with,
- Tami invented a cool new product but will have to discover who will buy it,
- Steve started a business with an established model, providing established solutions to an established market…but added a unique selling proposition,
- Alice started a business that combines two or more established models, providing established solutions to that each have previously established markets to provide a totally new customer experience
In 3 out of 4 of the above scenarios, the owner will probably consider the target market first and then decide on the best business solution to serve that target market. The validation process, as discussed in the last post, will then help to initially refine the target market. For example, Dan looked at a particular group of people (target market first) with a particular problem and invented a product that would solve the problem. Tami, however, will have to figure out not only if she has a target market but who it is. With Steve’s business, because it is an established model with a general target market (e.g.: convenience store), the only way to establish a unique selling proposition is to zero in on a specific group of people and come up with an idea that will prompt them to become customers. The same goes for Alice; if she is going to the trouble of combining several established business models to provide a unique customer experience, she’s certainly creating that experience for a particular target market. As you can see, in these scenarios, validation and target market are inseparable.
Bigger is Not Better
However, once you believe you’ve defined your target market, take a closer look. A target market can be much too broadly defined, which is often the initial inclination for many business owners. The fear of leaving out a potential customer leads them to market to an overbroad audience. Unfortunately, this tactic will likely have the opposite effect on sales.
When your target market is overly-inclusive, your message becomes too general and watered down. For example, if you’re trying to reach senior citizens and teenagers, you can’t really tailor your marketing just to teenagers or the older folks won’t understand. And if you speak to the seniors, the teenagers will ignore it all together. And trying to somehow speak to them both will only muddy your efforts and either confuse your prospective customer or miss them altogether.
The more narrowly you define and understand your target market, the more successful you will be. The old saying about not being able to please all of the people all of the time, is absolutely true. The key word is focus. Let’s look at an example to illustrate my point:
You’ve formulated a business plan for the “Women’s Work Experiment” that will combine most things a working mom needs under one roof. The Experiment will house a) an open work space and conference room with free wi-fi, b) fully-appointed and staffed daycare facility, c) work-out room, d) healthy-food eatery and coffee shop, e) a mini grocery store, f) day spa (hair, nails, Botox and more) and f) anchor pharmacy. You plan on selling a variety of different membership packages to the Experiment and may even open the day spa to the general public. Several investors have shown interest and you’re in the process of validating your idea. Who are you going to reach out to during the validation process? Who’s your target market? You created the concept for working moms so start there.
Think about this market in terms of grains of rice in a sifter. Put your working moms in the sifter and start sifting. To narrow down and focus your market, you’ll start sifting out those that don’t fit your ideal customer profile. Who is that?
- Working moms who have to work on-site all day every day
- Working moms whose children are in school full time
- Working moms who don’t live close enough to the Experiment to make it worth their while
- Working moms who can’t afford a membership
After this first step, you can start validating with the group you have left (moms of children under 6, can work remotely, likely self-employed, live in the general area and can afford to pay the membership fees). During the validation process you should learn a lot about this group of women that will help you to keep refining your target market.
Demographic Factors and Your Target Market
After validation and once your business is established, you will be able to obtain additional demographic information about your current and prospective customers. This information will help you keep narrowing your focus. Demographics simply refers to statistical data about a group of people and gives you detailed information about who your customer is. Demographic factors include: Age, Location, Gender, Income, Occupation, Education, Ethnicity, Marital Status and Number of Children
Psychographic factors and Your Target Market
Your target market’s psychographic factors will give you a better idea of how to appeal to your customer because it explains why your customer buys. Psychographics classify people according to their attitudes, hobbies, desires, what they enjoy doing and other psychological information. Psychographic factors include: Habits, Hobbies, Spending Practices, Values, Attitudes, Opinion, Activities and Interests
Again, obtaining demographic and psychographic information about your target market is much easier once you have real paying customer to study. You can obtain this information by conducting surveys or personal interviews . Through this process, you will be better able to understand when, where and how to reach your audience through targeted marketing. Remember this is a discovery process, an exercise that will yield real data that you must be willing to utilize. Failing to refine your target market can cost you lots of time and money as you flounder about trying different methods of reaching customers you don’t fully understand.
Continuing with our example, assume through surveys, personal interviews and examination of your memberships plus additional marketing and demographic research, you develop a demographic and psychographic profile of your ideal customer/client as follows:
- Female, age 28-41
- Live within 15 miles of the facility
- Average revenues $85K
- Work mostly in Marketing or Technology
- Have a Bachelor’s Degree
- 56% White, 41% Black and 3% Hispanic
- 98% married 2% divorced or never married
- Have 1.75 children under age 5 years
- Buy mostly organic and healthy foods
- Workout at least 4 days per week (at least 2 of which are yoga)
- Preferred social networks are Facebook, Pinterest and Instagram
- 85% Democrats who vote regularly
- Predominant hobby interior design followed by tennis
- Number 1 social concerns are global warming and safe water supply
Now you have what many marketers call a “Customer Persona” (aka: Buyer Persona, Marketing Persona, etc.) which will help you focus your marketing efforts (marketing content, product development, social media networks, public relations, advertising, etc.) through a well-planned marketing strategy including when, where and how you will reach your target market. Many marketers will even say to give this “persona” a name and of course keep her in the forefront of your mind in everything you do in the business (“What would Mommy Suzy think about adding Greek yogurt in the coffee shop?”). Get to know her and learn how to best speak to her interests, wants and needs.
 http://www.getbrandwise.com/branding-blog/bid/18622/What-are-marketing-psychographics and https://blog.hubspot.com/insiders/marketing-psychographics
 For some great tips on interview questions, formulating personas and a free persona template, see https://blog.hubspot.com/blog/tabid/6307/bid/33491/everything-marketers-need-to-research-create-detailed-buyer-personas-template.aspx#sm.000003a1t3zldffe6rcbqxaegmggg
Target Market Research Resources
Below, I’ve compiled a thorough list of resources that may help you research your target market (as well as other areas of your business).
- Reference USA – Absolutely amazing resource that you can access at home with your library card – available through most local libraries (Greenville participates)
- Cognitive Lode – Great site for Psychographic research: “We distill the latest behavioral economics & consumer psychology research down into helpful little brain gems.”
- Google Scholar – Search for scholarly articles, patents and case law (even though the url is .uk, the searches are US-based.
- Facebook IQ – “By harnessing Facebook insights and working with world-class researchers, we can help marketers understand people across generations, geographies, devices and time.” Great articles on consumer behavior and industry research
- Pew Research Center – Insights, publications, statistics and data on politics, media & news, social trends, internet & tech, science and more.
- City Town Info – Details on 20,000+ communities
- Google Insights – Consumer insights, data and measurement, all compiled by Google
- American Fact Finder (US Census) – Can drill down to county level information regarding ethnicity of specific types of business owners, etc.
- Business Dynamics Statistics – (US Census) – Provides annual measures of job creation and destruction, startups and shutdowns, etc.
- My Best Segments Zip Code Look-up – demographics per zip code
- Kauffman – research into “what drives innovation and economic growth in an entrepreneurial world…”
- Fed Stats – Statistics released by all types of federal agencies (education, science and engineering, transportation, etc.)
- Bureau of Labor Statistics – categories such as “time use” “consumer spending” “injuries and illness”, etc.
- Small Business Administration Office of Advocacy – Small Business Statistics
- NAICS Codes – North American Industry Classification System
- Biz Stats – (great for researching info for a business plan) you can find all sorts of business statistics and financial ratios, calculators and financial tools
- Zoom Prospector – helps you find right zip code to locate business based on your target market demographics
- Free Lunch – all sorts of free demographic and financial data
- Google Ventures Guide to Research – leans more toward validation but some great articles and info.
- Hoovers (Free version) – for B2B business searches – prospects and competitors
- Data USA – search stats by location, industry, occupation, education, etc. Great articles on all topics
- Survey Monkey – make your own surveys and analyze results
- Make My Persona (by Hubspot) – step-by-step persona wizard
- J. Walter Thompson Intelligence – trend reports on tech, lifestyle, culture, retail, food & drink.
- YouGovProfiles – a crazy site that lets you do a search for a brand, person or thing and then shoots out the demographics for the people who like that brand, person or thing (not sure I buy it since Bradley Cooper’s primary demographic is a 65+ male republican living in Nevada, working in advertising and making between $50-100K)
- Global Web Index – not cheap. “We combine the world’s largest study on the digital consumer with cutting-edge analytics and data science approaches, so marketers & businesses can make smarter decisions.”
- Trend Watching – starts at $500 per month; “we help forward-thinking business professionals in 180+ countries understand the new consumer and subsequently unlock compelling, profitable innovation opportunities”
- Claritas – research regarding your customers online, social media and offline marketing