- Target marketing deals with Place and how it’s segmented
- Product definition is intertwined with place because of the customers needs
- Before you target, you need to know the Total Available Market (TAM)
- Primary research deals directly with customers while secondary relies on government and industry data
- Segmenting markets allows for focused products.
- Just because a target market exists, does not mean customers will buy anything.
Now that we know the basics of marketing, it’s time to focus on specific markets that your product or service will address. A target market is a specific market segment that your product or service addresses. It’s your main customer base. Knowing their characteristics allows you to create targeted products that appeal to their unmet needs (or pain). Vital to this target market selection process is to define what you are creating.
A good definition of your product offering allows you to ensure that the target market you are focused on really has the need you want to satisfy. Many a marketeer has missed the mark by a poorly defined product attacking a target market where the customers did not care. Define your product in great detail so that you can see if it really fills a need. This is an iterative process, so you may refine your product definition as you interact with your target market.
Who Might Buy This?
Along with your product definition, you need to take a guess as to who may buy it. A rough guess is better than no guess and is required to at least narrow down a huge market. The refinement of your product and target market will come as you explore how your offering will satisfy the customers needs. This iterative process might even lead to killing the project because no one wants to buy your widget. At this stage, you might have a bunch of those dead ends until you hit upon a mix that works. Don’t get frustrated. There are lots and lots of problems to solve and markets that are dying for their pain to be cured. Now that you roughly figured out who might buy your widget, the following steps will refine your target market:
Step 1: Determine The Total Available Market (TAM)
Defining a target market requires knowledge of the overall market. This broad view is a good way to check that your target market assumptions are correct. It also gives you some overall market trends that may not be obvious if you just look at the target market. For example, if you look at the total automobile market, it may be declining but the high fuel efficiency, eco-cars market may be growing, etc.
Step 2: Segment Into Pieces
Once the TAM has been defined, you can now work on how you will segment it. The classic segmentation follows the characteristics of the end customer. Categories to consider include:
- Geographic: Region (US, Asia), City or metro area, climate, density, etc. Any characteristics that defines a specific physical region. For example, the Northeastern US automobile market.
- Demographic/Sociocultural: Gender, age, income, education, ethnicity, religion, etc. This has to do with the characteristics of the customers that may purchase your product or services. For example, male working class retirees.
- Psychographic: Lifestyle or personality. This deals with how the customer lives. For example, retirees who migrate to Florida for the winter or maybe jet setters who travel by boat.
- Behavioral: Relates to usage, benefits, status, attitudes and buyer readiness. Sometimes this couples with the psychographic but generally, it has to deal with what the end customer perceives as the benefit to them directly. For example, self navigating boats or remote monitoring of a second home.
You may want to use additional criteria for segments as well. There are really no hard and fast rules on this other than you want them to be consistent and clearly defined. It is best to use the same segments that industry reports or census data uses. That way, you can compare your numbers.
Step 3: Focus On a Segment
Now that you have several segments defined, you need to focus on one. A narrow focus will allow you to better validate your product offering. Focus is the only way to make sure you consider the important features. Too broad a focus and you end up with a product that will not meet anyones needs. This does not mean you can’t expand later but in order to expand, you need to start with a clearly defined base. As part of your segment focus, you need to define what success for that segment looks like. This could be sales, market share, initial customer feedback or whatever. Defining success for your segment allows you to monitor if you are making progress.
Step 4: Refine the Product Definition
As you segment, you will start to see opportunities for product refinement. That great feature you thought would be a killer might be a nice to have for your chosen segment. This happens all the time. Target market segmenting is tightly linked with product definition and the two iterate until things settle out.
Step 5: Position in the Target Market
At this point, you have a well defined product and market segment. Next is how you position that offering in the market. Position or approach is important aspect of how the market will become exposed to your whiz bang widget. When we talk about marketing strategies, we will get into more depth on this. For now, you need to think about how your entry will look. It’s kind of like your pickup line. Will you be aggressive or subtle? Tell a joke or get introduced. Directly ask for her number or play hard to get. All of these apply to how you approach your target market.
Step 6: Launch, Measure and Refine
The only way to really know if you got the target market and product right is to launch it into the marketplace. This is the ultimate confirmation of your assumptions and research. Determining success depends on how well you defined your success metrics. Knowing what you expect and how well you are doing towards those goals will allow you to adjust your approach. This measure and refinement step will be a constant source of new ideas and features for better products.
Target marketing is all about focus. This focus will allow you to craft better products and understand your end customers. It’s a constant balancing act between narrow enough to get stuff done and broad enough to sustain a business. This is a constant struggle because expansion potential is always there. Expansion has to be carefully weighted against the defocusing that will naturally occur.
Things To Ponder
- Figure out the Total Available Market (TAM) for a product or service. How many different sources did you use? How did they compare to each other?
- Choose a product you own. Figure out how it was targeted. Look at things like: demographics, geographic, psychographic and behavioral factors that guided the offering.
- Write a paragraph about a need you have. Who else has this need? What are the characteristics of the customers who have the same need? How would you solve the need?
- Create three questions you would ask potential customers about the need and solution in #3.
- Define several success metrics for a particular product you are working on or one you own. Have they hit them? Are they even on the right track?