What is a Target Market – And How To Find Yours

Having a clear understanding of your target market – the people your business serves – is crucial to your business’ success. Your entire marketing strategy hinges on your target market, influencing everything from product development to your choice of marketing channels.

In this article, we’re going to cover exactly what a target market is, how you can identify who your target audience are and provide some useful tips and tricks for relating to your target market better,

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If you prefer to watch rather than read, I’d recommend that you check out this great video on identifying your target audience.

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What is a Target Market?

Your target market comprises individuals most likely to purchase your products, sharing common characteristics such as demographics and behaviors.

Tips For Finding Your Target Market

In my experience, there are a few common pitfalls that people encounter when trying to find their target market. Make sure you follow my top tips to ensure your product is targetted correctly:

• Follow research, not your gut: It’s essential to conduct thorough research into who wants to buy your product rather than relying on assumptions
• Exclude people from your target audience: Some people make the mistake of trying to make their target audience as broad as possible so they have more potential clients. Instead, this makes marketing efforts less relatable for customers, meaning less sales.
• Get specific about the details: While generic details (such as age, gender, occupation, etc) are important to understand, the real value of your knowing your target market comes from the intricate details of your potential client (e.g. where they work, what they enjoy doing in their free time, etc)

Why Should I Define a Target Market?

Identifying a business’s target market is often an overlooked step by founders in the initial stages of creating a startup. With so many other “more important” things to focus on, it often seems like spending time looking at the small details of user personas is something that can be covered later.

However, from my experience, accurately defining a target market underpins almost all future product development and marketing efforts in a business’ lifetime, meaning that target market identification should be done early and thoroughly to help prevent your startup from failing.

Still don’t believe me? Have a look at these 5 benefits that providing a target market bring to your business.

1. Focused Messaging: Defining your target market allows you to tailor your marketing messages specifically to the needs, preferences, and behaviors of your intended audience.
2. Resource Optimization: Understanding your target market helps allocate marketing resources more efficiently, ensuring you reach the right people on platforms where they are most active.
3. Improved Conversion Rates: A well-defined target market increases the likelihood of attracting individuals who are genuinely interested in your products or services, leading to higher conversion rates.
4. Competitive Edge: Knowing your audience enables you to differentiate your brand by addressing unique pain points or preferences within your target market, giving you a competitive advantage.
5. Cost Efficiency: Targeting a specific demographic reduces wasted resources on marketing to irrelevant audiences, resulting in a more cost-effective and impactful marketing strategy.

What are the 4 Types of Target Markets (with Examples)

To ensure effective marketing, businesses must categorize their focus areas when segmenting a market.

Success hinges on correctly classifying target customers into four categories:

1. Geographic Segmentation: Targeting by Location
   • Businesses make strategic decisions based on the location and nature of their products or services.
   • Recognizes that different consumer groups in various geographic areas may have distinct needs.
   • Utilizes factors like country codes, postal codes, cities, and more to identify suitable locations for effective marketing.
2. Demographic Segmentation: Targeting Based on Customer Characteristics
   • Requires thorough research on the population to make informed decisions.
   • Defines target markets based on demographics such as age, gender, economic level, race, religion, and education.
   • For example, a beer company may target individuals aged 18 to 50 strategically.
3. Psychographic Segmentation: Targeting Based on Consumer Psychographics
   • Considers lifestyle choices of individuals in a specific geographic area.
   • Factors like personality, attitude, interests, values, and socioeconomic status play a role.
   • For instance, launching a pet product may focus on upper and upper-middle socioeconomic classes.
4. Behavioural Segmentation: Targeting Based on Consumer Behavior
   • Requires understanding consumer behavior in specific demographics or social settings.
   • Examines buying habits to align products with consumer needs.
   • Enhances chances of success by catering to preferences and requirements of the target market.

How Do I Identify My Target Market?

Identifying the optimum target market for your business is an iterative process that involves you starting high level and slowly working your way down to a specific small group of people, like a funnel.

Let’s take a look at the 6 steps to get there:

Step 1: Broad Categories

Begin by categorizing your audience broadly into the 4 broad market types that we discussed above. This gives you an overarching idea of your market which is useful to help you narrow down on the details that matter.

For example, “John, the stylish professional aged between 21 and 36.”

Step 2: Identify Circumstances

Next, we need to dive into the demographics of your audience—details such as age, gender, profession, income, marital status, and location which paints a more detailed picture of their lives.

Step 3: Understand Behaviors

After understanding your potential customer’s circumstances, it’s important to explore the personality of your audience. What do they like to read, listen to, eat, and do in their spare time? Uncover interests, hobbies, and characteristics to build a more humanized profile.

These things don’t need to be completely related to your products, as additional information can help shape an understanding of your customer, which could help make your marketing efforts or product creation more appealing.

Step 4: Identify Goals

Chances are, when a customer buys a product from you, they are trying to achieve a goal. Whether that be filling up a space on their wall with a customized poster, or getting fitter, it’s important to understand why your customer will be buying your product.

In addition, I’d recommend learning about potential customer’s overarching life goals and their immediate goals as well, as your business may be able to tap into these aspirations to help market your product.

Step 5: Identify Blockers

It’s important to identify the challenges and obstacles that potential customers may face when buying your product and achieving the goals that you discovered in the last step.

This information can help you to understand why they might need your product to begin with, and address anything that might get in their way of purchasing or using the product.

Step 6: Find Emotions

People don’t just buy products for ease of use. It’s important to tap into the emotions associated with a customer’s goals and obstacles to help convince them to make a purchase.

Understanding how achieving their goals or overcoming obstacles makes them feel is crucial to being able to connect with your potential customers and making a sale.

Target Market Identification Frameworks

In addition to the steps above, I often find the PVP and RFM frameworks incredibly helpful for breaking down the task of finding a target market.

The PVP Index

The PVP Index is a strategic framework focusing on Personal Fulfillment, Value, and Profitability to help companies identify the most suitable customer segments for their offerings. It goes beyond traditional demographics by emphasizing the psychological and emotional aspects of a customer’s decision-making.

The PVP index works by ranking different target markets on a scale of 1-10 against the following 3 components:

1. Personal Fulfillment:
   • Estimates how much a specific customer segment would enjoy working with your company
   • Emphasizes the importance of personal fulfillment in maintaining a healthy mindset and building a lasting business.
2. Value:
   • Evaluates how much a customer segment values the company’s work.
   • Stresses the significance of aligning brand values with those of the target market to build trust and create a strong emotional connection.
3. Profitability:
   • Assesses the income potential within a specific market segment.
   • Considers factors such as purchasing power, willingness to spend, and overall profitability to gauge revenue potential and ensure business success.

The total of these scores can then be summed up to work out the most appropriate target market.

PVP Index Example

If I had used the PVP index for my technical status page business, Status Hive when I was first starting out with entrepreneurship, my table would have looked something like this.

	Small Businesses	Large Businesses	Hobbyist Developers
Personal Fulfillment	8/10	6/10	10/10
Value	3/10	8/10	4/10
Profitability	3/10	9/10	1/10
Total	14/30	23/30	15/30

This provides an obvious metric that large businesses would be the most appealing target market for Status Hive, as the business could provide the largest amount of potential value to them, and could bring in the largest potential profit.

RFM Framework

The RFM model includes three measurable factors:

1. Recency:
   • Measures the time since a customer’s last activity or transaction with the brand.
   • Activity can include purchases, website visits, or app usage.
2. Frequency:
   • Examines how often a customer engages or transacts with the brand within a specific timeframe.
   • Customers with frequent activities are typically more engaged and loyal.
3. Monetary:
   • Also known as “monetary value,” this factor reflects the customer’s spending with the brand in a given period.
   • Big spenders may be treated differently than low spenders.

I’ve found this metric to be incredibly useful when identifying target markets as it allows you to find the audience that can bring in the most profits. To do this, I look at competitors and either use open data or my best guess if no data is available to perform my analysis.

Frequently Asked Questions

What Are the Two Types of Target-Market Activities?

The two types of target-market activities are broad-based marketing and niche marketing.

1. Broad-Based Marketing:
   • Definition: In broad-based marketing, businesses target a wide and diverse audience with their products or services.
   • Approach: This approach aims to reach a large market segment, often employing mass marketing strategies.
   • Example: Television commercials, billboards, or online ads with broad appeal that are designed to reach a broad audience.
2. Niche Marketing:
   • Definition: Niche marketing involves focusing on a specific, well-defined segment of the market with unique needs and characteristics.
   • Approach: This approach tailors marketing efforts to a narrowly defined group, providing specialized products or services that meet the distinct preferences of that segment.
   • Example: A company specializing in organic, gluten-free snacks targeting health-conscious individuals with specific dietary requirements.

Both approaches have their advantages and depend on factors such as the nature of the product or service, business goals, and the characteristics of the target audience.

Why Is It a Good Idea To Match a Specific Product To a Target Market?

Matching a specific product to a target market is a good idea for several reasons:

1. Relevance and Appeal:
   • Increased Relevance: Tailoring a product to a specific target market ensures that it aligns with the needs, preferences, and lifestyles of that particular audience.
   • Enhanced Appeal: A product designed with a specific market in mind is more likely to resonate with consumers, making it more appealing to them.
2. Improved Marketing Efficiency:
   • Targeted Marketing: Knowing your target market allows you to create focused and efficient marketing campaigns that speak directly to the desires and concerns of your intended audience.
   • Cost-Effectiveness: Targeted marketing efforts are often more cost-effective, as resources can be concentrated on reaching the most receptive audience.
3. Competitive Advantage:
   • Product Differentiation: Tailoring a product to a specific market segment can result in a unique selling proposition, setting the product apart from competitors in the eyes of consumers.
   • Market Niche: By catering to a niche market, a business can establish itself as a specialist, potentially reducing competition and increasing customer loyalty.
4. Customer Satisfaction:
   • Meeting Specific Needs: A product designed for a specific target market is more likely to address the unique needs and preferences of that group, leading to higher levels of customer satisfaction.
   • Positive Feedback: Satisfied customers within the target market are more likely to provide positive reviews and recommendations, further boosting the product’s reputation.
5. Increased Sales and Profitability:
   • Higher Conversion Rates: When a product resonates well with a specific target market, conversion rates are likely to be higher, leading to increased sales.
   • Optimized Pricing: Understanding the economic capacity of the target market allows for more precise pricing strategies, maximizing profitability.
6. Adaptability and Innovation:
   • Feedback Utilization: Directing a product to a specific market allows businesses to gather targeted feedback, enabling them to make necessary improvements and innovations.
   • Adaptable Features: Products can be adapted and evolved based on the changing preferences and trends within the specific target market, ensuring continued relevance.

Key Takeaways

1. Target Market Definition: Individuals with shared characteristics likely to buy a product.
2. Identification Tips: Rely on research, avoid broad targets, focus on intricate client details.
3. Importance of Defining Target Market: Enables focused messaging, optimized resources, improved conversion rates, competitive edge, cost efficiency.
4. Four Target Market Types: Geographic, Demographic, Psychographic, Behavioral.
5. Steps to Identify Your Business’ Target Market: Categorize broadly, dive into demographics, explore behaviors, recognize goals, and identify challenges.

Overview

Now that you’ve successfully identified your target market, learn how to create a great go-to-market plan, or see the 40 things you need to do before launching your business.