Finding your Target Market: The First Challenge every Small Business has to Face
Getting this wrong is the first step towards Failure........
After mentoring 40 small businesses and entrepreneurs in the last 12 months, one thing that has surprised me is, how little clarity people have towards knowing who their target market is.
I cannot emphasize how important it is to have this clarity right from the start. This will allow you to ultimately meet your personal and business goals.
What exactly is a target market?
A target market is a specific group of potential customers that a business aims to reach with its products, services, and marketing efforts. It represents a segment of the overall market that shares common characteristics, needs, preferences, and behaviors.
Most important point to understand is that small businesses need to prioritize the target market that has the highest pain point/problem/need, followed by highest willingness to pay for what you offer.
“Marketing to All is like Marketing to None”
How does knowing your target market help meet your Business Goals?
I. Design the right product/service:
Firstly, knowing your target market allows you to tailor your products or services to meet their specific needs and preferences of this highly prioritized market. You can literally map the features of your offering to the exact pain points your audience describes on a 1:1 basis while designing your product.
II. Message Effectively:
When you know this target market, you can create marketing messages that resonates with them, addressing their pain points and highlighting the benefits of your products or services that matter most to them. This personalized approach increases the chances of capturing their attention and interest
III. Efficient Resource Allocation:
Marketing resources, including time and budget, are finite. Focusing your efforts on this well-defined target market ensures that you use your resources wisely, avoiding wasted efforts on audiences that are unlikely to convert into customers.
IV. Provide Value in Exchange of Money:
Ultimately, providing value to the right target market would yield revenue, earnings and continued growth personally and for your business.
How to define your target market to craft a Sound Strategy?
Step I: Analyze your Offering
What does your product/service offer or would offer if you were to go in Business?
What gap do you want to fulfil by bringing this to the market?
Why do you think this product/service is needed today?
Define some features of your product or service?
Step II: Brainstorm the kind of Customers who might need this Offering
(Put this in the form of a table with the following headers Customer Cluster, Problems/Pain Points, Needs/Wants, Gains/Values)
Which customers would require this kind of a product/service? List all the ones that come to your mind. Cluster them into broader categories initially (eg: Marketers, Homeowners, Entrepreneurs, Storeowner, Restaurants, Spas, etc.)
Identify specific problems/pain points individual cluster of customers are looking for. Keep in mind that each cluster has a unique need/problem they are trying to address. It is important to list their specific problems/needs.
What value/gains are these list of customers looking to derive in regards to this problem? How did the customer expect their lives to be better with your product?
The best research comes by talking to actual customers through surveys, qualitative interviews, focus groups, interviews, etc. If you have provided similar service to anyone in the past incorporate that data into the above research. Keep in mind that the largest segment by volume may not always be the best customer for you!
Your past happy customers/CRM closed won opportunities provides the best insight for finding similar future customers.
Step III: Understand the Marketplace
What is the market size of these clusters that you have identified? Market size is simply the number of people who could potentially become your customers?
What regulations/trends are affecting them today that you need to be aware of?( Climate Change, Soil Conservation, Water Conservation, Plastic Reduction, antitrust laws, Labor laws, etc.)
What social trends are affecting these clusters of customers that may fasten the process of buying your offering? (Short form content, Community building, influencer, side hustles, etc.)
What sorts of things or opinions are becoming popular or unpopular? (Abortion, LGBTQ rights, Movie opinions, Book debates)
Are there any economic trends that might affect customer shopping behaviors?(Inflation, deflation, gig economy, rising interest rates, unemployment rate, consumer confidence in economy)
Step IV: Analyze the Competitors both Direct and Indirect ones
(Make a table for each competitor as well as any indirect competitor)
What are the businesses that offer comparable products and services?
Who else is targeting these clusters of customers?
What is their offering/features ?
What is their marketing strategy? What channels are they using?
What prices are they offering?
What good and bad reviews do each of them have?
Indirect competitors are businesses with different products or services that target the same client needs as your business. It is important to understand that customers can complete a task/solve a problem in multiple ways. Hence, it is important to consider all the possible ways in which the customer soles the problem today.
eg. An Excel Sheet can be an indirect competitor to a Task management software.
Step V: Prioritize the Market Segments (Top 3 Criteria that matter to me)
Which sub-cluster/sub-segment within a cluster is underserved, unhappy by competitors today? How can you serve this niche in a differentiated way? Does it fit with the capabilities of your offering?
Does this segment have the urgency to solve this pain point/problem? Would your product or service be something they really need today and help them solve ongoing pain points? Can you be a Painkiller rather than a Vitamin for them?*
Does this segment have the budget to satisfy your revenue goals?
Is the total relatable market/sales opportunity good enough to meet your business revenue goal?
Lastly, if you are a startup, have a unique business idea try to find some early adopters who are an influential group of customers/business leaders/have social media following/ frequently share opinions in this cluster that can help my business get a head start through social boost.
*Vitamins are "nice to have," but not need to have, whereas painkillers help tackling big pain points for your clients, which will help them drive more revenues or materially lower their costs and are “must-have” for them to succeed.
As a business owner, entrepreneur having a "painkiller" approach to building your business, your company should be more appealing to prospective customers
Many argue that this method of going after a subset of customers can be detrimental for their business. Focusing on a small market is not the world’s best business advice!
The reality is that prioritizing clusters of customers or target markets will allow you to streamline your marketing efforts, messages and services one segment at a time. It’s a hugely beneficial strategy – and one that can help bring you legions of loyal, loving customers.