What is a target market?
How do you define it?
How do you analyze your target market?
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What Is A Target Market
A target market refers to a group of people or entities that are determined to be the most likely to purchase a company’s products and services.
The target market can be characterized in different ways, such as their geographic location, income level, their gender, age, nature of employment, or others.
Successful companies are able to properly define their target market so they can target the right decision-maker who will potentially make a purchasing decision.
For example, a beverage company may want to target athletes by selling energizing drinks catering to the needs of highly active people.
When you know your target market, you can carefully devise a strategy designed to maximize your sales within that market.
For example, if the beverage company knows that it is targeting active people and athletes, it can devise its marketing and sales strategies designed to encourage this market to purchase its beverage products.
Why Is The Target Market Important
A target market is important as it allows your company understands its customers’ main characteristics.
The idea is to identify who may buy your products and services and how you can appeal to them.
Businesses that understand their target market can implement various strategies to generate sales within the identified market.
Some strategies include offering special discounts, creating unique advertisement campaigns designed to appeal to the identified market, and implementing a sales play allowing for maximum conversion.
For example, a software company that has designed a financial software solution may want to target small and medium-sized businesses as its ideal target market.
On the other hand, an enterprise software provider may target multinationals and companies having complex financial software requirements.
Knowing their target market will allow these companies to focus their time and energy on targeting the right decision-makers within these organizations.
Target Market Segments
It’s quite common for companies and marketing professionals to divide a company’s target market in four main segments: demographic, geographic, psychographic, and behavioral.
The idea is to divide their target market into groups or segments that share similar characteristics.
The demographic segment characterizes the target market by age, income level, education level, gender, and occupation.
The geographic segment takes into account the location and territory where the target market is located.
The psychographic segment considers the target market’s interests, values, attitudes, lifestyle, and needs.
The behavioral segment considers the target market’s decision-making process and how the target market makes purchasing decisions.
As you can see, companies that clearly define their target will gain significant insights into their targeted audience and can implement strategies to appeal to their target market.
Target Market Impact On Sales
The effectiveness of a company’s sales strategy and ability to generate sales will be largely influenced by its target market.
For instance, a company in the FinTech space may want to target manufacturing companies offering them financial software solutions specifically catered to the needs of such businesses.
Another software company may want to target large-cap organizations that own lots of real estate properties or equipment.
Once the company has a good idea of its target market, the market’s pain points, and the type of solution they need, it can develop its software product for its target market, market and promote it to them, and implement distribution channels allowing them to reach their target market.
A company may have different target markets.
Particularly, as a company grows, it may expand its target market characteristics and attempt to reach a broader market.
In some cases, companies may find that engaging in mergers and acquisitions will allow them to expand their reach and quickly access new markets.
How To Identify A Target Market
Typically, the first step in identifying your target market is to look at your own internal records.
In essence, you should look at your current customers and identify who are those that are currently buying from you.
Are individuals consumers buying from you or companies?
Is your customer base diverse or homogenous?
Do they have common characteristics?
Once you identify the key characteristics of your current customers, you will then be able to group them into segments.
The idea is to start broad and increasingly become granular in how you define your customers.
For example, you can start with the target market in Canada, then refine it to small and medium enterprises, then refine it to the high-tech industry, and then to FinTech, and then to real estate financial software, and so on.
Another important exercise is to look at who your competitors are targeting.
Is your competition targeting the same target market?
What is your competition doing to attract its customers?
Once you have identified your target market and performed your market segmentation, you will then be able to define and implement business strategies to attract them and convert them into paying customers.
You can focus on your product features and benefits that will most likely appeal to your target market.
Target Market Examples
Let’s look at a few examples of the target market to better understand the concept.
Nike is probably one of the most successful companies that have understood how to appeal to its target market.
Nike’s products are designed to cater to the needs of individuals that are young and aspiring athletes.
As such, Nike’s main focus is to cater to the needs of young athletes and active individuals looking for quality sports outfits.
Another company that has a target market focus is McDonald’s.
McDonald’s is notorious to cater to the needs of cost-conscious families looking to have a good meal in a nice and welcoming environment.
They have Happy Meals where they offer toys to children, have Ronald McDonald as the company mascot, and even have playrooms in their restaurants for children.
Clearly, they are targeting families with young children to come for both a good fast-food meal and enjoy their time in the restaurant.
Apple is one of the companies with the most loyal fans out there.
Steve Jobs intended for Apple to be synonymous with ingenuity, creativity, and the desire to be the best.
They were able to build such a loyal customer base by focusing on their target market’s values, not price.
Their products and services captivate their clients and appeal to their emotions.
So there you have it folks!
What is a target market?
In a nutshell, a target market represents the people or companies that you are looking to target so they buy your products and services.
Once you identify your target market, you can tailor your product offering, marketing, and sales strategies to attract your target market and cater to their needs.
You can define your target market by identifying those who buy from you, the key benefits of your business, and determine who will most benefit from your company’s products and services.
Once you have defined your target market, you can then refine your market into segments such as demographics, territory, behavior, or psychographics.
The better you can identify who your potential customers are and what appeals to them, the better you can target them and turn them into paying customers.
In this process, having the right legal team to support you in your sale cycle, contract negotiations, and transactional needs is key to executing a quick and painless transaction with your customers.
Be sure to consider working with a business attorney who understands the dynamics of your business.
AK-Law is a boutique law firm having a core focus on all facets of the business. We support businesses of all sizes in their day-to-day as well as strategic legal needs. If you want to know more about our firm, better understand what we do, or get a quote, be sure to reach out!
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