Overview

Imagine practicing archery with your eyes closedor throwing a football with a blindfold on. In both cases, being prevented from seeingyour target would make it nearly impossible to hit it. This concept can easily be appliedto business, as well. Doing business without knowing what your target market is willprevent you from reaching your objectives: increased sales, market share or brandawareness.

Where the blanket approach of mass marketing wastouted by marketing professionals of years past, today's industry experts are singing thepraises of one-to-one, or relationship marketing. And rightfully so. Today's consumers, asyou've heard many times, are savvier than ever before. With access to nearly any piece ofinformation they want via the Internet, consumers don't want salespeople spouting offscripted presentations. Rather, they need advocates who are willing to help them find realsolutions. How can you do that? By learning who your customers are; by finding out theirreal needs; and by offering them tailored products and services that work for them. Thefirst step in attaining those lofty goals is to choose a customer base that is appropriatefor your business.

Outline:

1. Identify Potential Customers
2. Conducting Market Research
3. Choosing a Target Market
4. Compiling a Customer Profile
5. Resources

I. Identify Potential Customers

There are two types of customer groups that you can target: individual consumers or other businesses. Individual consumers are somewhat more difficult to target because they are diverse and unpredictable, they typically have small individual budgets, and their buying preferences may change as they age. Businesses as a target market tend to be fairly stable over time and have large budgets to spend on various products and services.

It is not necessary to choose just one customergroup. You may choose to target both businesses and individual consumers if it makes sensefor your company. However, modifications may need to be made for your product or serviceif you choose to go this route. For example, the owner of a gift basket business maytarget mostly individual consumers as her main source of revenue, but have a secondaryrevenue stream from corporate customers. For the individual consumers, she may offer manycustomized options to satisfy their diverse tastes, and she would probably charge a higherprice to ensure a good profit margin. For her corporate customers, she would likely offera more limited product line — at quantity discounts — to allow her tomass-produce the baskets for large orders.

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II. Conducting Market Research

There are many sources of market research — much of which is free of cost — that have already been compiled that you can draw from for basic information about your prospective customer group. Search the Internet and your local library for studies and data that have been gathered for your particular industry.

For more specific information on yourprospective customer group, you will need to either hire a marketing research firm toconduct formal surveys for you, or you'll need to learn how to do it yourself. Sincemarketing research firms are rather expensive, most small owners will opt to conduct theresearch themselves. While the research you gather may not be as structured or in-depth asthat of a research firm, you can get sufficient information to identify your customer baseat a fraction of the cost of what you would spend otherwise.

The most important objective of conductingmarket research is to find out what markets your competitors are currently serving, wheremarket opportunities exist, and which markets will be most profitable for your business.

To begin, make a list of all of yourcompetitors, including everything from large corporations to small mom-and-pop shops. Ifthey have Web sites, visit each one and gather as much information about their productsand services as you can, including prices, customer service policies, delivery methods,warranties and return policies. If some of your competitors do not have Web sites, it isperfectly legitimate to call the company and ask for the information from one of thecustomer service representatives.

After gathering the information, compile it intoa table or spreadsheet. Identify areas that are weak or absent to identify possible marketopportunities. For example, if you find that none or only a few of your competitorscurrently offer same-day delivery of products, this may mean that there is a marketopportunity to serve a group of customers who must have your products the same day theyorder them. Don't forget: You can charge substantially higher prices for the convenienceof same-day delivery of your products.

Ask yourself:

What products or services are my competitors notoffering that I could offer profitably?

What competitive advantages do I possess that mycompetitors can't offer customers even if they wanted to?

What do my competitors offer that I couldimprove on?

Once you have a handle on your competitors, nextyou need to focus on your prospective customers. Conducting surveys is an easy way to findout your prospective customers' needs, buying preferences and spending habits, which inturn identify if they will make a good customer base for your company. Keep in mind thatyou should offer some sort of benefit or inexpensive giveaway to motivate customers andprospects to fill out your questionnaire. Some good examples include coupons or discountson the next purchase they make from your company.

Your survey must include questions that obtaininformation on the following aspects of your potential customers:

• Demographic information — Includes age, sex, nationality (if necessary), etc.
• Psychographic information — Includes lifestyle data like hobbies, interests, opinions, etc.
• Geographic information — Includes information about where the subject lives and where he or she purchases products and services. This can be as broad as the country or state in which they live, or as narrow as the county, city and neighborhood.
• Behavioral information — Includes information about how the subject uses products or services.
• Benefit information — Includes information about the perceived benefits the subject receives from products and services.

III. Choosing a Target Market

After you have conducted a sufficient number of surveys, compile the results to determine which markets make the most sense for your business to target. Ensure that the market you choose:

• has easy access to your products and services, whether it is by visiting your store, or ordering by phone, fax, email or your Web site
• is not inundated with other products and services that are indistinguishable from yours
• is willing to pay a price for your products and services that allows you a reasonable profit margin

IV. Compiling a Customer Profile

Just as a mission statement guides the operation of your company, a customer profile will guide your sales effort. Develop an overview of your target customers so that you and all of your employees are clear about whom you are selling to. 

Here is an example of a typical customer profile:

Company X, an upscale sporting goods company, targets American male executives between the ages of 25 and 35, with an average household income of greater than $100,000, who enjoy outdoor sports and purchase sporting goods at least twice per year for recreation and travel.

After you have a clear customer profile, you andyour staff must learn to think like your target customers to anticipate their needs. Youmust track the trends and preferences of this group regularly by staying in constantcontact with them and altering your products and services accordingly. Good methods forstaying on top of your customer base's changing preferences include: informal face-to-facediscussions, in-store surveys, direct-mailings, and feedback requests on your Web site, inyour store, and included with all products shipped.

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V. Resources

Books

Peter Francese, Rebecca Piirto, "CapturingCustomers : How to Target the Hottest Markets of the '90s," American DemographicsBooks 1995

Linda Pinson, Jerry Jinnett, "TargetMarketing : Researching, Reaching and Retaining Your Target Market," Dearborn Trade,1997

"Target Marketing for the SmallBusiness," Upstart Publication Co., 1996

Sally Dibb, Lyndon Simkin, "The Market Segmentation Workbook : Target Marketing for Marketing Managers,"  Intl. Thomson Business Products, 1997

Web Sites

The American Marketing Association.

American Demographics, publisher of American Demographics magazineand Forecast, a newsletter of demographic trends and business forecasts.

U.S. Census Bureau. Especially useful are the Population Profile,and the Statistical Abstract of the United States.

The Social StatisticsBriefing Room Data Web Sites for the 50 States.

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