Who Is Your Target Buyer?
Do you know precisely who your customers are? Do you
know what type of people or businesses they are? For example,
if you sell to consumers, do you have demographic information
(e.g., what are their average income ranges, education,
typical occupations, geographic location, family makeup,
etc.) that identifies your target buyer? What about lifestyle
information (e.g., hobbies, interests, recreational/entertainment
activities, political beliefs, cultural practices, etc.)
on your target buyer?
This type of information can help you in two ways. It
can help you make changes to your product or service itself,
to better match with what your customers are likely to
want. It can also tell you how to reach your customers
through advertising, promotions, etc.
How can you refine your understanding of your customer
base? Look at the issue from two angles: miche marketing
and market segmenting.
The "heavy users" of your product can be thought
of as a market "niche" that you should attempt
to dominate. Niche marketing today means targeting, communicating
with, selling, and obtaining feedback on the heaviest
users of your business's products or services.
Picking the right segment of the market is important
to achieving sufficiently large sales volume and profitability
to survive and prosper as a company. The right market
- measurable in quantitative terms
- substantial enough to generate planned sales volume
- accessible to your company's distribution methods
- sensitive to planned/affordable marketing spending
It is also important to examine other factors that could
affect your company's success:
- strength of competitors to attract your niche buyers
away from your products
- similarity of competitive products in the buyers'
- rate of new product introductions by competitors
- ease of entry/protectability in the market for your
Even large companies have embraced niche marketing, continuing
to refine and target their product offerings to different
buyer groups. As an example, Nike restaged a multi-billion
dollar company that had plateaued by pursuing a segmentation
strategy. Nike designed and marketed athletic shoes for
each different sport, often further segmenting with specialized
models within each sport (e.g., "Air Jordan"
basketball shoes, and additional basketball models called
"Force," represented by Charles Barkley and
David Robinson, and "Flight," represented by
It is also important to be able to identify and estimate
the size of your target market, particularly if you're
thinking about a new venture, so that you can tell if
the customer base is large enough to support your business
or new product idea. Remember that it's not enough that
people like your business concept. There must be enough
target buyers on a frequent-enough basis to sustain your
company sales, spending, and profits from year to year.
For example, selling a product or service that people
may need only once in a lifetime (e.g., an indestructible
toothbrush) may not be a sustainable business, unless
a large number of people need it at any given time, or
everyone needs it eventually.
Segmenting the market
If the universe of all potential buyers is your "market,"
then the market can be divided up into sections or "segments"
based on any number of factors. For example, you might
divide up your customers by age group and find that you
sell most of your products to people aged 18 to 34. You
might divide them up by family size and find that you
sell most of your products to married couples with young
Many small businesses stop there, thinking they have
enough information to be able to identify and communicate
with their most likely customers. However, larger companies
will attempt to find out even more information about their
customers' lifestyles, values, life stage, etc.
The key terms to know when segmenting the market are:
- Demographics refers to age, sex, income, education,
race, martial status, size of household, geographic
location, size of city, and profession.
- Psychographics refers to personality and emotionally
based behavior linked to purchase choices; for example,
whether customers are risk-takers or risk-avoiders,
impulsive buyers, etc.
- Lifestyle refers to the collective choice of
hobbies, recreational pursuits, entertainment, vacations,
and other non-work time pursuits.
- Belief and value systems includes religious,
political, nationalistic, and cultural beliefs and values.
- Life stage refers to chronological benchmarking
of people's lives at different ages (e.g., pre-teens,
teenagers, seniors, etc.).
Larger companies segment their markets by conducting
extensive market research projects, consisting of several
rounds of exploratory research:
- Customer and product data collection: Researchers
gather data from users of similar products on:
- number and timing of brand purchases;
- reasons for purchases;
- consumers' attitudes about various product attributes;
- importance of the product to the lifestyle of
- category user information (demographics, psychographics,
media habits, etc.).
- Factor and cluster analysis: Researchers analyze
the data collected in (1) to find correlations between
product purchases and other factors, as a basis for
identifying actionable consumer target "clusters."
Clusters are defined as "niche markets," where
there are identifiable numbers of buyers or users who
share the same characteristics and who can be reached
by adept advertising and promotion.
- Cluster identification and importance ranking:
Researchers then determine
- whether clusters are large and viable enough to
spend marketing funds on them;
- whether potential marketing niche clusters fit
strategic company objectives; i.e., does marketing
to this group fit your existing image and long-term
What can smaller companies do to segment their markets?
- Smaller companies can research secondary data sources
and conduct individual interviews with key trade buyers
and consumers or end users of their products and services.
This is called qualitative research. Often qualitative
research can be accomplished for free or little expense.
- Smaller companies can also conduct informal factor
and cluster analysis by:
- watching key competitors' marketing efforts and
- talking to key trade buyers about new product
- conducting needs analyses from qualitative research
with individuals and groups.
- In many cases, smaller companies have access to the
same databases as large companies for estimating the
sizes of market segment clusters and their importance.
Some low-cost sources of external secondary data include:
- trade and association publications and experts;
- basic research publications;
- external measurement services;
- government publications.
- Smaller companies can segment markets by geography,
distribution, price, packaging, sizes, product life,
and other tangible factors in addition to demographics
and lifestyle and psychographic clustering.
Source: CCH Business Owner's Toolkit