Define a Target Market for Your Small Business
by
Peri H. Pakroo, J.D.
Learn how to define a profitable target market or niche for your business.
In order for any business to succeed, it must have enough customers to buy the product or service offered. Before you launch your new business, take time to evaluate your potential customer base. Figure out whom you expect to be your most likely customers -- in other words, your target customers. Then tailor your marketing efforts, as well as your products and services, to those customers.
Why Is Defining Target Customers Important?
Having a clear vision of your expected customer base will increase your business' chances of success. By defining your target customers you can:
- better determine if there are enough potential customers for your business (in other words, whether there is enough demand for your products or services)
- tweak your business idea to better meet the needs of your potential customer base
- tailor your products and services to better meet your customers’ needs and desires
- target your marketing efforts to reach your most promising prospects, and
- craft your marketing messages appropriately -- using the right tone, language, and attitude to appeal to your best prospects.
Defining a target market will not limit your business. New entrepreneurs sometimes resist defining a target customer base, thinking it might limit the business or reduce the number of potential customers. This is a misconception. Identifying target customers does not prevent your business from accepting customers that don’t fit the target profile. If such a customer seeks your product or service, you will still be available.
Defining a target market will increase cost efficiency. Defining a target customer base increases your cost efficiency. Unless you have unlimited marketing resources, it's much more effective to focus your marketing efforts on potential customers who you have determined are likely to buy your product or service -- rather than wasting time and money courting the vast world of prospects who merely could become customers.
How to Define Your Target Market
In a nutshell, defining your target customers means identifying the specific characteristics of the people or businesses who you believe are most likely to buy your product or service. These characteristics are sometimes called a demographic profile. Common characteristics used to classify customers include:
- age
- gender
- income level
- buying habits
- occupation or industry
- marital status
- family status (children or no children)
- geographic location
- ethnic group
- political affiliations or leanings, and
- hobbies and interests.
Create a customer profile. Use these criteria to draw a profile of your most promising potential customers -- those who have a real need or desire for your products or services. A maternity store specializing in professional wear, for example, may identify its target customers as 25- to 40-year-old pregnant, married women in the legal, financial, and real estate industries, within a ten-mile radius of the store. A bike shop with a focus on single-track mountain biking gear might define its target customers as 18- to 25-year-old single males living within two miles of the local university.
Be specific. Deciding how narrowly to define your target customer is more of an art than a science, but in general, you should err on the side of being specific. Business owners often make the mistake of defining their customer base too broadly, making it very difficult to engage in effective marketing efforts. Remember: A solid definition of your target customer serves as a foundation for all your marketing activities. The more carefully you've defined your target market, the more likely your marketing efforts -- even simple, low-cost methods -- will bear fruit.
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