The importance of your target market

break even analysis

Starting a new small business is one of the most exciting things you can do in your life. But at GoForth, we also know that understanding your target market inside and out will increase your odds of small business success.

Why research your target market?

Imagine you’ve decided to open a flower shop. You find suppliers, lease a building and open your doors for business.

But by the end of your first week you’ve made a total of two sales.

What happened? Here are some possibilities:

  • Your shop is located in an area that gets little to no foot traffic, like a business park.
  • You opened your shop across the street from a family-run flower shop that has been successful in that location for 25 years, with many loyal customers.
  • People aren’t actually interested in buying your bouquets.
  • Your prices don’t align with your product’s perceived value.

These are just four barriers to your business’ success that market research could have revealed. Researching your target market can make the difference between a successful business and one that isn’t. There’s time and cost of associated, but it’s an important investment in your small business’ success.

Quite often, new entrepreneurs think their target market is “anyone who’ll buy my product.” However, this simply isn’t true. Using the flower shop example, maybe your target market is people who are interested in classes on floral arrangement. Maybe it’s influencers who want fresh decorations for the backgrounds of their photos or videos. Take the time to identify your target market.

Ready to research your target market?

Great! Check out our blog posts on Primary and Secondary market research

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The 7 rules of creating market segments

market-segmentation

In order to make better use of your marketing dollars, we recommend that you narrow down your market into specific customer groups (anywhere from one to four groups) that will be most profitable and accessible to target.

Our rules for creating customer segments? Glad you asked. Essentially, your segments should be basically different from one another, but members of each segment should be basically the same.

Understanding your target market

When visualizing your target market, consider the following main elements:

Demographics – Age, income, gender, education, family status, income level, occupation, social class, ethnicity.
Psychographics – Lifestyle, personalities, attitudes, opinions, values.
Geographics – Cultural, climate, regional and national differences, population density, population growth rate.
Behaviours – Buying patterns, usage rate, price sensitivity, brand loyalty, benefits wanted.

The 7 rules of customer segmentation

Rule #1 Each segment should be measurable; you should know how many potential customers you have.
Rule #2 Each segment should be large enough to be profitable.
Rule #3 Each segment should be basically different from other segments; they should be unique.
Rule #4 Members of a segment should have common, unsatisfied needs.
Rule #5 Each segment should have strong growth potential.
Rule #6 Each segment should be suited to your company’s goals and capabilities.
Rule #7 Each segment should be accessible through communication and distribution channels; you have to be able to reach them with your message.

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How to research your customers

business customers

Who will you be selling to? Selling to everyone is highly discouraged, since everyone has different wants and needs. Instead, it’s best to decide on target markets – groups of customers who share similar characteristics that you can market to more effectively. It’ll save you time and money, reduce headaches from trying to please large amounts of people with different needs, and it can make the difference between a successful business and falling flat right out of the gate.

Gathering market research data is a crucial step in the business planning process. Market research is used to determine consumer opinions, industry trends and competitor stats.  It’s used to gauge consumer interest in new products and service offerings and to establish a list of prospective customers. There are a number of ways to go about collecting this data, but we’ve developed a free, step-by-step guide on how to use one of them – CANSIM.

Check out GoForth’s free guide to navigating Statistics Canada’s CANSIM database, and start the process of understanding your ideal customers today!

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From the archives: Why is target marketing so important?

small_business_target_marketWhat’s your target market? Why does it matter? GoForth’s President Dr Leslie McGeough has this to say on the topic:

My own business advisor (and everyone should have an advisor, no matter how seasoned an entrepreneur they are) once told me the field is full of white rabbits. Pick the white rabbit you can catch and go after that one. In other words, there are opportunities and potential targets everywhere. Don’t fall into the trap of thinking “Everyone will buy my product!” Focus, focus, focus.

Read Dr McGeough’s advice on target marketing here, and enjoy!

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How to implement your small business branding and marketing strategy

implement-small-business-marketing-strategySo you’ve created a branding and marketing plan for your small business that you’re really proud of. Congratulations! However, you’re not done yet – now you have to put those great plans into action.

Once you have a clear strategy for the branding and marketing of your small business, it’s important to put together an implementation plan to make sure everything gets done properly.

Here are the steps we suggest you take to develop a solid marketing implementation plan:

  • Set your clear and measurable business objectives (for example: 12 new clients in six months, or $250,000 in sales in 12 months).
  • Make sure you segment your market.
  • Pick one or two segments and make sure you understand what needs they have.
  • Define your product, pricing, promotion and place strategies.
  • Create an implementation schedule.
  • Create measures of success along the way.
  • Create your marketing budgets and decide how much to spend and track those expenses.
  • Evaluate your strategy. How did you do? Is there anything you could have done differently?

Do you have any branding and marketing strategy advice for your fellow entrepreneurs? What steps worked for you?

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