Insights: Article

Understanding Your Target Market Can Help You Make Better Business Decisions

By Dan Macintosh

July 28, 2018

One of the keys in business is to have a product or service that consumers want. Without it, you may end up with a lack of revenue stream and closed doors. But just having a product is one thing. Knowing who specifically needs your product is another. Welcome to the world of target markets.

What’s a Target Market?
According to the Small Business Encyclopedia, a target market is “a specific group of consumers at which a company aims its products and services.” Sounds simple, right? Well, not exactly. Often, business owners are very general in determining their target market, hoping to get a bigger slice of the pie.

For instance, if you own a salon, you might say your target market is anyone who has hair; if you’re selling phone cases, maybe you’d say your target is anyone with a cell phone. Here’s the hard truth: your target market is not everyone.

In theory, having everyone be your target sounds great. In reality, no business no matter the size, can be everything to everyone.

Why Do I Need to Know My Target Market?
Knowing your target market is the first step in determining who you market your products toward. Having a clearly defined target market provides guidance along the road of growth for your business and can help you improve your product or service based on feedback from actual customers. Without having a clear picture of who your target market is, you may be wasting time, money and energy on the wrong people, people who won’t even think about buying your product. If you are focusing all your efforts on the wrong market, you may be missing opportunities to increase sales or even losing sales to your competitors.

Why Isn’t My Target Market Everyone?
Simply put, not everyone is interested. Think of it this way: when determining who you want to market your product to, you may look at demographics as part of your research. However, “everyone” is not a demographic, nor a specific group of people. A target market is all about specific characteristics that your desired customers possess.

Another consideration is the fact that it just isn’t possible. Let’s consider this scenario. Imagine you wanted everyone in Sioux Falls, S.D., to be your target market. In 2017, the population of Sioux Falls was estimated to be 176,888 according to the U.S. Census Bureau. If these people were to order your product, it would be extremely difficult, if not impossible, to meet the demand. In short, narrowing your target market can help your business be more efficient.

How Do I Determine My Target Market?
There are many criteria that can be considered in determining your target market. Here are a few areas to consider:

  1. Geographic – Otherwise known as people living in a certain geographic area. Looking at a geographic area allows you to see what the characteristics are of the people in the region your business operates in.
  2. Demographic – The demographic characteristics of consumers get down to the nitty gritty of who the person really is. Demographics can include age, gender, income and level of education, etc.
  3. Psychographic – Psychographic segmentation looks at interests and personalities. Segmenting by psychographic qualities can give your business a snapshot of day-to-day life by examining attitude, lifestyle and personal values.
  4. Behavioral – Here we’re talking about how people behave, as well as what potential customers desire from your offerings. This can include brand loyalty, user status, desired benefits, community involvement (numbers don’t lie) and the readiness of the buyer.

These four categories can be helpful in determining your target market as they allow you to narrow down each category to the customers you feel best fit with your business.

Putting It All Together
Having a clearly defined, reasonably sized target market can allow your business to put time and effort in to those who are interested in the business, and weed out the ones who aren’t worth your time.

Latest Insights

September 28, 2018
Check out the infographic below to see a few reasons why outsourcing is a great option to help handle critical business functions.
August 2, 2018
As you run your business, you’ll begin to acquire a large amount of information related to your finances including receipts, canceled checks, invoices, etc. As this occurs, you may begin to wonder what’s worth saving and what’s okay to toss.
July 24, 2018
As a small business owner, you have several things to keep track of and and as you’re growing, you may even bring on help. Once this happens, a necessary and important step is to ensure you’re correctly classifying your workers.
June 29, 2018
Banks look at three broad categories when considering small business financing: business cash flow, personal financial strength, and collateral value.
June 28, 2018
You need to be cautious when entering into a bartering relationship and remember to track everything and the key to accounting for bartering is making sure you still record the income earned and expenses incurred.
June 27, 2018
Your tax liability will be affected depending upon whether your work is classified as an actual business or as a hobby. Here are nine factors from the IRS regulations used to determine if an activity is a business or a hobby.
June 26, 2018
It’s important to have people who challenge you to think differently and to question your goals and plans so they can become stronger and more solidified. If you’re always surrounded by “yes” people, you’ll never have the chance to grow into…
June 20, 2018
There are a lot of considerations that go into growing and managing a small business, especially one in the process of growing and improving, but it’s not always easy. In fact, often it might feel like your business just won’t cooperate and you’re…
March 16, 2018
Your books keep you in touch with your business’s operations and obligations. They will also help you see problems before they occur.
Find A Location