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Tuesday, 16 April 2013
10 Questions to Ask Before Determining your Target Market
The better you understand your customer, the faster your business will grow. But new ventures often struggle to define their target market and set their sights too broadly.
"We often overestimate the market size, and in many cases there may not be one at all," says Robert Hisrich, director of the Walker Center for Global Entrepreneurship at the Thunderbird School of Global Management in Glendale, Ariz.
Here are 10 questions that can help you determine whether you have a target market and what it is: Who would pay for my product or service? First, try to understand the problem that your product or service can solve, says Greg Habstritt, founder of SimpleWealth.com, an Alberta, Canada-based advice website for small-business owners. Then, use that information to help determine who would be willing to pay for a solution. "Not only do [your potential customers] need to have the problem, but they need to be aware they have the problem," Habstritt says. He recommends using Google's keyword tool to see how many people are searching for words related to your business idea. Who has already bought from me? To refine both your target marketing and your pricing strategy, see who has already bought your product or service, says Amos Adler, president of Memotext, a medication compliance app maker in Bethesda, Md. You can gain valuable insights by releasing the product in a test phase and letting potential consumers speak with their wallets. Am I overestimating my reach? It's easy to assume that most people will need your service or product. But rather than make assumptions, reach out to groups of potential customers to get a more realistic picture of your audience and narrow your marketing efforts. You can conduct surveys, do man-on-the-street type interviews in stores, or organize small focus groups. "We get so passionate about the idea and how good it is that we overestimate the market size," Hisrich says. What does my network think? As you try to understand your target market, it may be challenging -- and expensive -- to seek feedback from potential consumers through surveys, focus groups and other means. But you can tap into your social networks to get free feedback. Many people in your extended network will likely be willing to take the time to give you opinions and advice, says Bryan Darr, founder of Mosaik Solutions, a data analytics company in Memphis, Tenn.
Am I making assumptions based on my personal knowledge and experience? Your own personal experience and knowledge can make you believe that you understand your target market even before you conduct any research, Habstritt says. For example, if you're a fitness buff and want to start a business related to personal health, you may assume you know your customer. "Don't assume that you can think like your target market," Habstritt says. "You have to ask them and talk to them to really understand them."
What's my revenue model? Figuring out how you'll reap revenue can help you find your target market, Hisrich says. Social ventures can be particularly tricky, he says, because without a specific plan for getting revenue it's easy to overestimate the size of the customer base. But if you're revenue model is simply selling a product online, it can be easier to figure out a target customer.
How will I sell my product or service? Your retailing strategy can help determine your target market, Hisrich says. Will you have a store, a website or both? Will you be marketing only in your home country or globally? For example, an online-only business may have a younger customer than one with stores. A brick-and-mortar business may narrow your target market to people in the neighborhood.
How did my competitors get started? Evaluating the competition's marketing strategy can help you define your own target customer, says Darr. But of course, don't simply copy the marketing approach of your biggest competitors once you define your target consumers. "You must have a way of differentiating what you are doing from what the other guys offer," he says.
How will I find my customers? As you start defining your target customers, try to determine whether you can efficiently market to them. You'll need to do some market research and study your target audience's demographic, geographic and purchasing patterns. If you're selling from a storefront, you need to know how many people in your target market live nearby. If you're selling from a website, you need to learn about your prospective customers' online behavior. Understanding how to locate your customers early on can help you establish a game plan once you start building a marketing strategy, Hisrich says.
Is there room to expand my target market? Be prepared to redefine your target market or to expand it over time, Darr says. For example, figuring out whether you're targeting a domestic consumer or customers throughout the world can be a good start. As the power of mobile mapping has grown in the last decade, he's seen the number of target markets grow at his own firm. In the beginning, Mosaik dealt mostly with wireless operators, but now he also counts cable providers and broadcasters as clients, Darr says.