The better you understand your customer, the faster your business will grow. But new ventures often struggle to define their target market and set their sights too broadly.
"We often overestimate the market size, and in many cases there may not be one at all," says Robert Hisrich, director of the Walker Center for Global Entrepreneurship at the Thunderbird School of Global Management in Glendale, Ariz.
Here are 10 questions that can help you determine whether you have a target market and what it is:
Who would pay for my product or service?
First, try to understand the problem that your product or service can
solve, says Greg Habstritt, founder of SimpleWealth.com, an Alberta,
Canada-based advice website for small-business owners. Then, use that
information to help determine who would be willing to pay for a
solution. "Not only do [your potential customers] need to have the
problem, but they need to be aware they have the problem," Habstritt
says. He recommends using Google's keyword tool to see how many people
are searching for words related to your business idea.
Who has already bought from me?
To refine both your target marketing and your pricing strategy, see who
has already bought your product or service, says Amos Adler, president
of Memotext, a medication compliance app maker in Bethesda, Md. You can
gain valuable insights by releasing the product in a test phase and
letting potential consumers speak with their wallets.
Am I overestimating my reach?
It's easy to assume that most people will need your service or product.
But rather than make assumptions, reach out to groups of potential
customers to get a more realistic picture of your audience and narrow
your marketing efforts. You can conduct surveys, do man-on-the-street
type interviews in stores, or organize small focus groups. "We get so
passionate about the idea and how good it is that we overestimate the
market size," Hisrich says.
What does my network think?
As you try to understand your target market, it may be challenging --
and expensive -- to seek feedback from potential consumers through
surveys, focus groups and other means. But you can tap into your social
networks to get free feedback. Many people in your extended network will
likely be willing to take the time to give you opinions and advice,
says Bryan Darr, founder of Mosaik Solutions, a data analytics company
in Memphis, Tenn.
Am I making assumptions based on my personal knowledge and experience?
Your own personal experience and knowledge can make you believe that you
understand your target market even before you conduct any research,
Habstritt says. For example, if you're a fitness buff and want to start a
business related to personal health, you may assume you know your
customer. "Don't assume that you can think like your target market,"
Habstritt says. "You have to ask them and talk to them to really
understand them."
What's my revenue model?
Figuring out how you'll reap revenue can help you find your target
market, Hisrich says. Social ventures can be particularly tricky, he
says, because without a specific plan for getting revenue it's easy to
overestimate the size of the customer base. But if you're revenue model
is simply selling a product online, it can be easier to figure out a
target customer.
How will I sell my product or service?
Your retailing strategy can help determine your target market, Hisrich
says. Will you have a store, a website or both? Will you be marketing
only in your home country or globally? For example, an online-only
business may have a younger customer than one with stores. A
brick-and-mortar business may narrow your target market to people in the
neighborhood.
How did my competitors get started?
Evaluating the competition's marketing strategy can help you define your
own target customer, says Darr. But of course, don't simply copy the
marketing approach of your biggest competitors once you define your
target consumers. "You must have a way of differentiating what you are
doing from what the other guys offer," he says.
How will I find my customers?
As you start defining your target customers, try to determine whether
you can efficiently market to them. You'll need to do some market
research and study your target audience's demographic, geographic and
purchasing patterns. If you're selling from a storefront, you need to
know how many people in your target market live nearby. If you're
selling from a website, you need to learn about your prospective
customers' online behavior. Understanding how to locate your customers
early on can help you establish a game plan once you start building a
marketing strategy, Hisrich says.
Is there room to expand my target market?
Be prepared to redefine your target market or to expand it over time,
Darr says. For example, figuring out whether you're targeting a domestic
consumer or customers throughout the world can be a good start. As the
power of mobile mapping has grown in the last decade, he's seen the
number of target markets grow at his own firm. In the beginning, Mosaik
dealt mostly with wireless operators, but now he also counts cable
providers and broadcasters as clients, Darr says.
Read more stories about: Marketing, Finding customers, Marketing strategies, Customer research, 10 Questions
Alina Dizik is a freelance journalist and writer based in New York City. Her work has been published in The Wall Street Journal, iVillage, More magazine, The Knot, BusinessWeek and the Financial Times.
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