A part of your business plan is to define your target market: you need to describe who your target customers are to successfully market your goods or services towards them. Today we are going to learn about how to define and describe your prospective customers in your target market.
First of all, what is a target market? The first step in target market analysis is to find out your primary secondary, and tertiary target market. These individual target markets are based on “segmentation characteristics” within the total addressable market. What are segmentation characteristics and the addressable market? The addressable market is the largest possible area of your target market which your business can target. Segmentation characteristics include:
- Psychographic characteristics: include such personality traits like beliefs, attitudes, life experiences, beliefs and needs.
- Geographic characteristics: are location-based factors such as city, mobile workers, country, state and lifestyle setting (such as rural versus urban, upper class suburb versus lower class housing).
- Consumer characteristics: customer-based factors including shopping frequency, loyalty and willingness to purchase from certain areas, localities or the Internet.
- Demographic characteristics: specific, objective factors such as race/ethnicity, education, age, gender occupation and income.
In defining your target market, the scope of which you define your customers is critical. If your definition of the target market is too broad, it will be hard to identify their needs and you risk wasting money on marketing and promotion and not getting great results. On the other hand, if your target market is too narrowly defined, then you may find it difficult to generate a customer base that is profitable.