Many entrepreneurs are so excited about their idea that they think everyone else will be too. However, that’s just not the case. Don’t fall into the trap of thinking “Everyone will buy my product!” or “I’ll find my clients as I go along!” This can spell failure for a new business.
Finding your target market
Does a market for your product or service even exist? Is it big enough and sustainable enough that your business becomes profitable? Small, scattered, unpredictable or unstable sales spell early doom for many small businesses. There’s a lot to know and understand about your potential customers. The better you know them, the better you can meet their needs and solve their problems.
What’s covered in a target market analysis?
- Customer demographics – Characteristics of a population, likes gender, age, income and education for consumer markets; or sales, number of employees, sales territory, and industry size for industrial markets.
- Customer psychographics – Information about your customer’s lifestyle, as well as on their attitudes, interests, opinions and reasons for buying products or services similar to yours.
- Customer behaviours – What do your customers buy now? Why? How will they benefit by switching to your product or service?
- Customer geographics – Where are your customers located? What city, region or country? How will that affect your potential business?
- Market size – How many people or organizations would buy your product or service? How much would they buy, and how often?
- Market need – Does your product solve a problem or fill a need?
- Volume – How much of your product or service would they purchase and when?
- Market communication – What is the best way to reach your target market? Print ads, social media, newsletters?
- Competitive evaluation – Which competitive products or services do they currently use, and what do they like or dislike about each?
- Prototype feedback – If you are able to develop a prototype, how did customers react to your new idea?
This critical information can be gathered with primary or secondary market research methods. Secondary methods are less costly and less time-consuming, but primary methods often give you more accurate information.
Questions and thoughts to define your target market
- Define your customer. Complete one definition for each of the market segments you can identify.
- Define your customers in terms of type (consumer or business), demographics, psychographics, behaviours, and geographic location.
- Estimate the market size. How many of each of these target market customers would be in the area(s) where you wish to sell?
- What are the unsatisfied needs of this market that your product or service would satisfy?
- Why would customers buy your product instead of a competitor’s?
- How much would they pay for your product or service? How much would they buy?
Once you’ve got a fairly good idea of who your customers are, narrow down your list into customer segments. Then, pick one segment you can catch and forget all the others until you’ve got that initial target in the bag. Don’t waste your time and money chasing customers randomly and frantically. It takes time, but focused customer research is a worthy investment for your business!