“Who is your product or service really for?”
Sounds like a simple question — but you’d be surprised by the number of small business owners who can’t answer in specifics.
One common response? “Everyone.” But if you’re trying to satisfy everyone, you’ll end up satisfying no one.
Or “business owners.” But there are so many different types of businesses. A pharmaceutical startup will have wildly divergent interests from a company that sells cookware.
The most common response, though: “I don’t know.”
For your growing startup to succeed, establish your target market before you do anything else.
What’s a target market?
A “target market” refers to a specific, defined segment of consumers that your company plans to serve with its products or services.
Examples of a target market:
- For a tech company: Millennials who are tech-savvy, high-income, and hold at least a bachelor’s degree
- For a subscription supplements company: Women in their 40s and 50s, who are well-to-do and passionate about self-care, but also environmentally conscious
- For a commercial printer: Businesses with 50-100 employees, with a minimum revenue of $1 million/year, that operate in the state of Wisconsin
4 reasons why your business needs to know its target market
It’s tempting to skip this step, especially if you feel that your business’s offerings could be used by anyone: If you sell cookware, for example, surely every household needs cookware, right?
Here are four reasons why it’s still important to zero in on a specific customer segment.
1. Position your company within your industry
It’s pretty rare for a business to come up with a product or service that is 100 percent unique. So chances are, you won’t be the only company in the market for your industry — and there might already be a few major players in the space. To run with the cookware example, you’d be competing with the likes of Le Creuset, Farberware, and OXO.
Because other people are already doing what you do, you need to figure out what makes you different. Why will people choose you over everyone else?
To answer that question, you’ll want to find out:
- What do your competitors do extremely well?
- Who do your competitors serve (who is their target market)?
With that information, you can decide whether to go after the same target market, or whether to shift your focus to a different group.
2. Establish yourself as an industry leader
Your business will achieve excellence when you can find what it is you do — and then do it incredibly well.
It’s hard to develop a best-in-class product if you spread yourself thin trying to be everything to everyone.
But if you zero in on a particular consumer’s problems, you can create a superior product that excels at what it’s supposed to do. That’s the first step to developing a loyal customer base. Which brings us to the next point…
3. Build a foundation for long-term business success
It pays to start small — yes, even if you have big dreams of eventually taking over the market in your industry! It sounds counterintuitive, but the biggest brands all started out by first establishing how good they were within a given niche.
Take Amazon as an example: Amazon didn’t start out selling everything for everyone; in fact, the company started out selling only books. Amazon expanded its offerings only after it had found a workable online retail model, cornered significant market share in the bookstore industry, and established a core customer base.
Narrowing your target market shouldn’t be limiting. To see success on a wider scale, you must first nail your value proposition to your most important audience.
4. Make the most of your limited resources
As a startup, money matters — and you won’t have a lot of it. Unlike Amazon, small businesses can’t easily access cheap capital.
Marketing to everyone is a waste of your resources. Maximize your ROI by focusing on the people who are most likely to buy: those who genuinely need and want what you have to offer.
How to define your target market
Start with research. This is especially useful if your business is new and doesn’t have a significant customer base yet.
You can also use your website analytics to gain some initial insights into your customers and their behavior. If you haven’t yet, we highly recommend getting a robust analytics tool. We love Google Analytics because it’s effective and free!
But ultimately, you’ll want to test your assumptions, which means talking to real people — that is, your actual clients. Find out who they are, what they do, and how they approach the problem-solving process. What problems can your product or service solve for them? Dig deep.
It’s important to stay flexible through this process. Your initial assumptions could be wrong, or your target market could evolve as you refine your product or service (that’s a big part of the Lean Startup Model). Either way, stay open to constantly adjusting your conclusions based on real data.