Without your customers, your business has no chance to succeed. You need to know your customers inside and out to properly target and market to them.
Otherwise, you’re setting your business up for failure.
To assess which customers to market to, conduct a target market analysis.
What is a target market analysis?
Your target market is the group of potential customers your business wants to sell its products or services to. To determine your business’s target market, you can conduct a target market analysis.
A target market analysis helps you figure out who to market and sell to. When conducting a target market analysis, ask yourself the who, what, when, where, why, and how of potential customers.
Questions you may ask yourself while conducting a target market analysis include, What are your potential customers’ hobbies or interests? How old are your potential customers? When are potential customers most likely to purchase your products or services?
To help grow your business, you need to know which customers to target. You must know your target audience so you don’t waste time and money marketing to the wrong customers. Take your time while conducting your analysis to ensure you’re targeting and attracting the right type of customer.
6 Steps for conducting a target market analysis
Whip out your pen and paper and use the six steps below to conduct a market analysis for your small business.
1. Identify your target market
To begin your analysis, identify your target market. You need to understand who your customers are and where they come from.
Research different demographic customer factors such as their:
- Age
- Income
- Gender
- Location
- Occupation
- Education level
- Marital or family status
Determine who your customers are and why they buy from you. While reviewing current customers, pay attention to the type of customers that generate the most business. And, take a look at which products your customers gravitate towards.
Think about both your potential and current customers during your analysis. Pinpointing your target market and why they purchase your goods or services helps you better cater to current customers. And, it can help you market more efficiently to potential customers.
2. Create customer personas
Customers who find your product or service appealing typically have a few characteristics in common. Developing customer personas for common traits can help fine-tune your marketing strategies.
Using consumer information, craft a customer profile. Many businesses have more than one customer profile.
Look at different demographics (e.g., age, income, gender) as well as the psychographics of each customer. Psychographics are more personal characteristics of a customer, including things like personality, attitude, values, and interests.
Once you compile and compare your current and potential customers’ data, begin creating their customer profiles.
Use your findings to create your customer personas. But, don’t just write down your personas and toss them to the side. Continue to evolve your personas as your company grows.
3. Analyze competition
To further analyze your target market, you need to also understand your competition’s customers and who they’re targeting. Although it seems kind of crazy to spend time focusing on your competitors’ marketing efforts, it can benefit your business in the long-run.
Smart businesses identify competitors’ weaknesses and use them to their advantage. Take a look at who your competition is targeting, their marketing strategies, and what kinds of weaknesses they have.
Ask yourself questions about your competitors like:
- Who are their customers?
- What are customers purchasing from them?
- What is the competition’s pricing?
Depending on how your competition is doing, you may or may not want to use a similar target market.
4. Look at your products or services
What your business offers says a lot about the types of customers you can attract. Before you try to target a certain market of people, look at your products and services.
When I started my accounting software and payroll software company, Patriot Software, I spent countless hours coming up with ways to convey to customers how we could solve their problems.
But hey, the hard work paid off. I was able to figure out which customers needed our product the most. And, I was able to pinpoint the customers who are most likely to use our software.
To entice new customers, you have to know how your offerings appeal to them. Analyze your products or services. How does it compare to the competition? Are there ways to improve your product or service? What do customers like most about your product or service?
Put yourself in your customers’ shoes and think about what you do and don’t like about your product or service.
5. Select markets to target
Did you narrow down your target market? Great! Now it’s time to decide which target markets you want to market to.
Review your data and analyses to choose which customers to promote your products or services to. Make sure the target market you select can afford to purchase what you offer. And, make sure the demographic has a need for your offerings. You don’t want to be caught up trying to sell to a market that doesn’t want what you’re selling.
Keep in mind you can select more than one target market. Many businesses market to many types of customers, depending on what they offer. Even though one target market might be stronger than another, it can be beneficial to advertise to more than one market.
6. Implement your decision
Before implementing your decision, evaluate your choices.
Ask yourself questions like, Are there enough people who fit my criteria? Can they afford what I offer? Are they easily accessible? Will potential customers see a need for my product or service?
The good news is, defining your target market is the hardest part of the analysis. Once you have an idea of who you’re targeting, you can begin reaching out to them. And, you can tweak and perfect your target markets as time goes on.
After you evaluate your decision, put your research to work. Your analysis can help identify holes in the market, which you can use to your business’s advantage. And, those untapped markets can lead to bigger and better things for your business.
