Target Market

Target Market: “Who Are My Customers?”

by Tom Gray | on Jan 27, 2012 |  Comments

Everybody says you must know your customer, but it’s hard to come up with a brief, clear description when a lender or an advertising guru asks you to “describe your target market.” What’s the value of some abstract definition of your customers? Why make the effort to create one?

Payoffs From Defining Your Target Market

               – Reasonable sales forecast, so you can budget the amount of money you need

               – Reasonable view of the potential size of your business, so you are not kidding yourself

               – Makes borrowing money feasible; no lender lends until you define your market

               – More sales, because your product (and your inventory of companion products) is designed to                fit the needs of your target customers

               – More sales, because your pricing is designed to fit your target customers

               – More sales per advertising dollar, because you select media that reach your target, and your                message is directed squarely at what is important to them

               – More sales per promotional dollar, because your promotions address their particular needs at           the right time

               – More repeat customers, because your return and service policies meet expectations

How to Define Your Target Market

Start by describing the personal situation of your perfect customer: he or she is (describe the person) and he or she wants to meet this need: (the one your product meets).

Then generalize this description to include measurable “attributes”. This enables you to research the size of this target market. Some attributes might be age, income, occupation, family size, gender, location, type of residence, etc. Some might be attitudes rather than demographics. You might even want to include purchase or ownership of something, such as boat or a horse or a motorcycle.

For example, my target market might be adults aged 50 to 70 with income over $75,000 within 5 miles of my location who love to dance. Maybe the real sweet spot is male and single as well.

You may have more than one segment in your target market. If so, be able to describe the attributes of each segment.

Once you have the attributes of your target market, you can use databases to find out how many people fit your target market description. See the next article for how to do it. By the way, you can use databases to identify your competitors too!

Can you describe your target market with measurable attributes?

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com

 

Market Size: How Many Are Out There?

by Tom Gray | on Jan 27, 2012 |  Comments

Now that you have defined your target market (see Target Market: “Who Are My Customers?”, you can find out how many are in it – your market size.

Data on the size of your market is stored in databases. Those with the most value require a subscription, and the good news is that libraries subscribe for you! Find a library with a good business collection, and then talk to their reference librarian who specializes in business.

A community college such as College of DuPage is a good source. They even offer a scheduled webinar on the Reference USA database. Some (but not all) local public libraries have good business collections too.

The librarian can suggest the databases likely to have the data you want, and can show you how to use them. Usually you will need to have a library card to access the databases on-line through the library’s website, but often you can apply for and get a library card that same day.

One database available without a subscription is American Factfinder (census data), which is available online free. This database (now named Factfinder2) sorts census data according to the attributes you enter. It is much easier to use than www.census.gov.

The table below shows nine sources with data you can use to define the size of your target market segments.

Reference USA is great for either identifying other small businesses who are competitors in your area, or for providing the names, size, and contact information for businesses who might become your customers, i.e., not only your target market but a sales prospect list as well!

For example, in DuPage County Illinois there are 173 auto top and body repair shops with revenue less than $2.5 million. The list provides the executive’s name/address/phone, and the email address as well for some of them..

The Encyclopedia of Associations is listed because associations often have databases of their members and other industry information. You can find the association in this source, and then go directly to the association for their information, or join them to get access to it.

Market Share Reporter can be useful to know what market shares your competitors have, to estimate a reasonable market share for your company to aspire to.

Attitudes, such as “love to dance”, can be found in Lifestyle Market Analyst.

Household Spending is your source for how many people (of what type) own a particular type of item in your target geography, if this is the key characteristic or attribute of your target market.

You will probably need to use some creativity to interpolate data from more than one database to estimate the size of your target market, but you will be working with real data, not just a hunch!

 

Sources Content Type Bus Cons
Reference USA YP; bus./type in selected area; contact info; size! DB X
Plunkett’s Research Online Aggregated stats DB X
Encyclopedia of Associations Industry (& other) associations Book X
Market Share Reporter Company market shares Book X
American Fact Finder Census; segment by demographics DB X X
Lifestyle Market Analyst Segment by attitudes & preferences Book X
Household  Spending Who spends how much on what; segment by behavior Book X
Statistical Abstract of US Everything! Book X X
Direct Marketing List Source Types of lists you can rent; better to use a list broker Book X X

 

Were you able to define your market size? Let us know about your successful search!

 

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com