Knowing your ideal target market is one of the many elements to check off in your “startup business” checklist, but it is undoubtedly the most important part of the process.
What is a target market?
The target market is the specific group of people most likely to buy your products or services. They are the people you should focus on heavily – the kind of people who come back again, recommend you to their friends, and talk about you on social media.
How do you define your target market?
Many small business owners create products they wish they had. Take the shoe brand “Allbirds,” for example. The brand was started after its founder Tim Brown struggled to find shoes made from merino wool. “Allbirds” was created to fill that gap, and Tim was the first customer of the brand and the target market.
However, continuing to rely on “I am my own customer” for too long can be dangerous. Assumptions about the target market audience can kill market research. What paying customers want from your products can differ significantly from the product you want to create.
For instance, suppose you are against Facebook and deleted your account in protest of its privacy settings. If your target audience is like you, you would exclude Facebook ads from your marketing campaign ideas. However, this may hinder your ability to reach out to a portion of potential customers who have a lot in common with you.
You are a small sample of one. You do not represent the entire target market or audience or your customer base.
In fact, there is a good chance that you behave very differently from your potential customers, so using your own behavior as a baseline could be disastrous.
Corey Haines, founder of Hiya Health, said, “In fact, there is a good chance that you behave very differently from your potential customers, so using your own behavior as a baseline could be disastrous.”
Researching multiple target markets shouldn’t be complicated if you are just starting out, but it’s helpful to have a small target market that provides at least the minimum viable information you need to know about your ideal customers before diving in.
Darren Leith, founder of Hiya Health, recommends seeking answers to the following questions: Who will benefit most from your product or service? Who will touch this product? Why do they need your product or service? What makes this product different from competitors?
How can you find the answers?
Hosting focus groups
Are you starting your market research from scratch without existing customer data? The quickest way to get immediate feedback is to host a focus group: a group of eight to ten people who provide honest feedback about your soon-to-be-launched product.
You should talk to people in your target market who are not in the sales cycle.
Many people rely on sales for feedback. People don’t tell the truth when it comes to money.
Advertise that you are looking for people to participate in a research study. Offer people an incentive to participate, such as a free product or a $25 gift card. For example, if you’re looking for the target market for a new wine label, organize a wine and cheese party at a local farm. The more comfortable and engaged people are in the focus group session, the more likely they are to give honest and open answers.
Or you can host the focus group online using web conferencing tools like Zoom. This way, you can invite people from all over the world without limiting the research to the opinions of people in a specific area.
When
Choosing people to join a focus group, start with broad criteria to understand the research market – especially if this is your first experience in the world of market research. Remember: assumptions about who might buy your product can lead you in the wrong direction. There’s always the option to customize after excluding a specific group that is not necessarily your target market.
At the event, ask open-ended questions such as: What are the qualities you look for in the brands you purchase from? What needs to happen in your life for you to buy this product? If you can’t imagine yourself buying this product, who would you buy the item for as a gift?
Don’t be afraid to dive into complex matters. Instead of a one-way survey, you can extract the ideas, feelings, and stories that people share when you communicate face-to-face (or screen-to-screen). Ask open questions and draw out the exciting parts of their answers for further discussion.
Existing Customer Surveys
“Your current customers are a great source,” says Jan Grégoire, CEO of Lovebox. This statement is true: current customers have spent their valuable money on your product. In many cases, following the money leads directly to your target market.
Jan suggests, “Find out why they buy from you. Do they have any common interests? Then, take a detailed look at your product or service. What are its key features? What are its benefits? Once you have that information, you can determine what type of customers will benefit from your product.”
Look at the data at the end of the backend processes of your e-commerce store. For example, customers will share their mailing address for shipping purposes. Compile that data into one spreadsheet to find out what your most popular locations are.
You can also add a birth date field to your post-purchase account creation page. Offer customers a free gift or discount code on their birthday in exchange for age-related information for your target market research purposes.
Collect more data automatically by adding a customer survey in your order confirmation emails. Keep the survey short and engaging to encourage new customers to share their feedback. Ask a mix of demographic and psychographic questions such as: What is your education level? How do you spend your free time? Why did you choose to buy our product? What was happening in your life at that time? What channels did you use to discover this product?
Apps like POWR Customer Survey and Zigpoll and Fairing Post Purchase Surveys can also do this on your behalf if you prefer to keep your order confirmation messages clutter-free.
In any case, look for common threads in the responses you receive. The ideas, behaviors, and personality traits you see recurring are those shared by the customers who pay for your products – and your target market as well.
Monitoring Competitors
In a crowded market, knowing the competitive landscape can help you pinpoint your focus, especially if the products you sell are quite similar.
Toothpaste brands are a good example. If you analyze popular toothpaste formulations, you will notice very slight differences. Traders in this field stand out thanks to strong branding aimed at a specific target market.
Make a list of competitors in your niche market. Find them by asking this question in your customer feedback surveys: Did you consider any other products before deciding to purchase ours? If so, who were they and what made you choose us?
Although it’s unlikely that any of these competitors will freely share information about their audience, you can do some investigative work by:
- Researching
- the brand name on social media
- consider the influencers who collaborate with each brand
- investigate customer reviews and case studies
- McKinsey & Company
- Gartner
- Pew Research Center
- Age
- Religion
- Ethnicity
- Generations (e.g., Generation X, Generation Z, Millennials, etc.)
- Income level
- Marital status
- Education level
In marketing my Shopify store, Dead Sea Trading Co., I looked at my biggest competitor and used Alexa.com to determine that their target market is women aged 35 to 65+ who earn over $100,000 a year. To reach this market, I started a free online book club for women in this age group and included ads for Dead Sea Trading Co. in appropriate places. The results were impressive and traffic to my store has tripled since starting the book club.
Although competitive analysis is a good starting point for understanding your target market, the goal is to differentiate yourself from them. For this reason, Justin Chan, Growth Director at JuneShine, advises using this data to “find a niche market they are ignoring.”
Exploring Existing Research
Once you have a strong understanding of the types of people in your target market, delve deeper into the insights, feelings, and behaviors they share through existing industry research.
The following platforms share consumer behavior trends that can be leveraged:
McKinsey published a report titled “The State of Grocery in North America,” which grocery store owners can use to identify their target market by focusing on those who shop for fresh fruits and vegetables.
Marcus Mattson, Vice President of Growth at Sozy, said, “There are many tools that help you dive deep into your target audience, but keyword research can uncover the most intimate pain points that customers or brands may not be ready to talk about. Mental health issues, relationship problems, body image issues… all are revealed in keyword research.”
If you know that the target market for your health supplements consists of women going through menopause, for example, try using Google’s autocomplete box to see relevant terms that those individuals are searching for.
But remember: target market research requires real, tangible data, not assumptions. For this reason, Marcus adds, “To validate insights, I talk to customer support and social media teams to find out what real customers are talking about and how they are talking about it, and that informs my strategy for all the content on the site. Once you have customers buying, you will get information about the people most likely to purchase your products. That can take you a long way in your research on your target audience.”
By Platform or Sales Channel
E-commerce brands differ in their target audience across the platforms and sales channels they sell on. For instance, a seller of handmade products will have a different target audience for their Etsy profile, e-commerce site, and brick-and-mortar store.
The people buying from the brand’s online store will differ from those visiting its physical store in Houston. Geography is the most obvious difference: selling online opens the door to potentially reach customers around the globe. You do not get that luxury with a physical store (unless you are in a tourist destination).
Similarly, the platforms through which you market your business vary when it comes to target markets. Those discovering products through Instagram are usually following an influencer who uses the platform to make a living. However, the target market for Pinterest users may prioritize handmade goods over mass-produced items.
To identify
Your target market for a specific sales platform or channel, repeat the steps we covered. Survey current customers who found or purchased your products through each of them. Create Google Analytics segments for each source referenced, then use the e-commerce purchases report to see the most popular products among visitors from each channel.
Or go directly to the platform itself. Many social media platforms have features for surveying your audience, including story polls on Instagram.
You can even organize a contest where followers win something – like a free product – in exchange for information about your target market on that channel. “Comment below on why you want to win” is a simple conversation starter to get followers talking.
What is the size of my target market?
Calculate the size of your target market by conducting some desk research. Take advantage of free resources, such as those listed below, to find out how many people share the same characteristics you’ve identified.
The U.S. Census Bureau is a great source for checking employment, income levels, and how people spend their leisure time. Statista also compiles data on how many people purchase, view, stream, or read something.
You can also use Facebook’s audience building tool to see estimated sizes based on the interests, ages, and locations of your target market. (Important note: Facebook’s audience building tool only includes data from its users, so you may want to avoid this technique if you are targeting a market that does not use the platform.)
A common mistake marketers make when defining their target market is assuming that everyone is a customer. You may try to reach anyone and everyone, hoping that they will turn into customers if your marketing message resonates. In reality, the opposite happens.
If you can’t define who your target market is, your marketing will look weak, and you’ll waste money on people who have no interest in what you have to say. Sam Baran, an e-commerce entrepreneur, said, “If you can’t define who your target market is, your marketing will look weak, and you’ll waste money on people who have no interest in what you have to say.”
The same issue arises if you go for a market that is too narrow. Of course, you can reach a smaller group of people with individualized and personalized marketing messages. But a target market of 100,000 people, with an average conversion rate of 2.86%, means you have 2,860 paying customers. If they buy products worth $50, that results in revenue of $143,000. Repeat customers can increase this number, but it still may not generate enough revenue to turn a life-long business into a larger operation.
There’s no one-size-fits-all practice for your target market size. Some industries differ significantly from others. There are more people interested in buying groceries compared to those who are interested in buying “Star Wars” fashion, for example.
As a rough guideline, assume you will achieve an average market penetration rate of 2% to 6% – that is the percentage of the target market that buys your product. Multiply your market size by these percentages to see the upper limit of revenue that could be generated.
For comparison: Apple claims a 51.62% market share of mobile operating systems, which is why you see iOS products everywhere.
How to segment and reach your target market
You won’t run marketing campaigns to reach your target market. That would be too broad. Segmenting your market to identify a target audience for individual campaigns is what helps you take action based on your research. If you are using Shopify, Shopify segmentation can empower you to uncover powerful insights about your customers.
So,
Segment your target market into smaller subcategories to create a target audience – a smaller subset of your target market that your marketing efforts are directed towards. Within these categories, there are buyer personas: fictional representations of one target audience within your target market.
Take the target market of Great Little Trading Company as an example. Their ideal customers are parents of young children. However, there are other variables, such as the parents’ geographic location, the child’s age, and income level, that come into play. It would be a mistake for the seller to ignore those who are parents of young children but do not check all three boxes. They are still part of the target market – just a smaller subcategory of it.
For the common traits that appear in some potential customers but not in others, consider them subcategories of your target market. Here are three common ways to use this data in digital marketing.
Demographic Segmentation
Demographic target market segmentation means creating personas for individuals with common traits, such as:
Determine the percentage of each demographic market subcategory and allocate your marketing budget accordingly. If you know that half of your target audience is between the ages of 40 and 65, for example, allocate half of your marketing budget to campaigns directed at these individuals.
An example of this is online pay-per-click advertising, where a company can choose to serve ads only to a specific gender or age range rather than to all genders and age groups. It can also be…
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