Before I dig into the next series of posts on the three pillars that “hold up” the Business Bridge, I wanted to touch on Target Market one more time. It’s a major component in Product-to-Market fit that a lot of people struggle with.
In this post, I’ll describe a few different ways of looking at target market, and hopefully one or more of them will click with you.
Picking your Target Market
You’ll often hear that you get to pick your target market, but that doesn’t mean you can pick just anyone you want and try to sell them whatever you feel like. Too many owners start with a product they want to sell, then search the earth trying to find someone who wants to buy it. This is a really hard way to build a business.
There are three ways to pick a target customer
- “This group of people has a problem and I want to help them.” – this is how many small businesses start. They know a group of people who struggle with something and sell them products and services to help them. It also requires the most flexibility in what you will offer them.
- “There is a problem I’ve seen and I want to help everyone who has it.” – this is what most entrepreneurs who start larger (national and international) companies do. They find something that frustrates people or a way to make their lives better, and then bring it to market.
- “You were planning to buy something, but I offer something better.” – this used in retail stores and online markets and you’re counting on the turning slightly better search results, photos, or packaging into sales. It’s also a common method for local service businesses like accountants, graphic designers, and plumbers.
Notice that all three of these center on potential customers and the things they want. People buy because of what they want, whether it’s reaching a goal or solving something that bothers them, not because of what you want.
Target Market Recipe
When picking a Target Market, there are several ingredients you need to consider. The results of these will tell you if it’s a market where your business is likely to succeed:
- What your potential customers have in common
- The problem they have (also referred to as their “reason to buy”)
- How how many people have that problem (how many people you can potentially sell to)
- How important/urgent that problem is to the people who have it (how much they are likely to pay for your product/service)
- The market conditions
- How many other companies are offering options
- What those options are
- What the economic conditions are
- How you will validate your theories about that market
So yes, you can pick any market you like… but if you want your business to succeed you need to pick one that is most likely to buy from you.
“Validation” just means testing your theory. I’ll be doing an entire article on it later, but basically the idea needs to be tested at each stage. For example, questions like “Does this group of people actually have this problem?” and “Do people actually have a hard time finding a solution to it?” need to be tested. “Does my product/service meet their needs?” is the final test. Formally, each one of these is called a “hypothesis”, and you’re carrying out experiments and surveys to find out if yours is true or false. That’s a whole other post, though.
When you are struggling with picking a target market, one way to narrow it down a little is to figure out which people would most likely NOT buy from you.
- If you sell high end clothing (like $300 T-shirts), you can rule out 90% of the country for purely economic reasons.
- If you own a gift shop in Arizona, heavy fur parkas probably won’t sell well because people there aren’t subjected to sub-zero temperatures very often.
- If you don’t ship internationally, make sure none of your ads are running in other countries.
- Maybe you’ve decided to only sell locally and never ship your products.
The examples can almost be funny because they seem so obvious to you, but doing this can help you start to narrow things down.
The Food Court
One of my favorite analogies for target market is a food court.
You want to open a restaurant in a food court, so you research malls with a food court in them and pick the one you want to open in based on several factors.
You want to find a mall that still has decent crowds and is possibly even growing. As much as you hear about the death of retail, some mall are wildly active.
Then you look at the food court in that mall. What restaurants are already there? When are they busiest? What kind of food sells best? What kind of food sells worst? What to the people eating there have in common? What people do you see shopping but not eating there? Could you offer something that gets those people to eat there? Are there any open spaces in the food court? If not, would the mall owner let you rent space for a cart nearby? Are there other locations in the mall outside the food court where a restaurant might do well?
Based on your research, you could test out ideas with a small trial setup (maybe like the cart I just mentioned), just to see if enough people would actually buy what you’re offering for it to be a profitable business.
In practice, the “food court” could be almost anything. A downtown area. An online marketplace like Amazon or Etsy. A retail store like Target or Wal-Mart. Maybe even all of the above.
This is what target market research is all about: finding a group of people, researching the market conditions, and figuring out what people in that market are most likely to buy.
If I had to boil down “target market” to the absolute bare minimum, it would be this:
“Whose life are you trying to make better?”
That’s it. You are trying to make someone’s life better. As they grow and change in life, they are more likely to keep buying from you if you adapt to keep helping them.
Yes, you DO get to pick your target market. That doesn’t mean you can pick a random group of people to whom you can sell whatever you want. It means picking a group that you are committing to serve well.
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