Imagine practicing archery with your eyes closed or throwing a football with a blindfold on. In both cases, being prevented from seeing your target would make it nearly impossible to hit it. This concept can easily be applied to business, as well. Doing business without knowing what your target market is will prevent you from reaching your objectives: increased sales, market share or brand awareness. Where
blanket approach of mass marketing was touted by marketing professionals of years past, today's industry experts are singing praises of one-to-one, or relationship marketing. And rightfully so. Today's consumers, as you've heard many times, are savvier than ever before. With access to nearly any piece of information they want via Internet, consumers don't want salespeople spouting off scripted presentations. Rather, they need advocates who are willing to help them find real solutions. How can you do that? By learning who your customers are; by finding out their real needs; and by offering them tailored products and services that work for them. The first step in attaining those lofty goals is to choose a customer base that is appropriate for your business.
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 customer group. You may choose to target both businesses and individual consumers if it makes sense for your company. However, modifications may need to be made for your product or service if you choose to go this route. For example, owner of a gift basket business may target mostly individual consumers as her main source of revenue, but have a secondary revenue stream from corporate customers. For individual consumers, she may offer many customized options to satisfy their diverse tastes, and she would probably charge a higher price to ensure a good profit margin. For her corporate customers, she would likely offer a more limited product line — at quantity discounts — to allow her to mass-produce baskets for large orders.
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 Internet and your local library for studies and data that have been gathered for your particular industry.
For more specific information on your prospective customer group, you will need to either hire a marketing research firm to conduct formal surveys for you, or you'll need to learn how to do it yourself. Since marketing research firms are rather expensive, most small owners will opt to conduct research themselves. While research you gather may not be as structured or in-depth as that of a research firm, you can get sufficient information to identify your customer base at a fraction of cost of what you would spend otherwise.
The most important objective of conducting market research is to find out what markets your competitors are currently serving, where market opportunities exist, and which markets will be most profitable for your business.
To begin, make a list of all of your competitors, including everything from large corporations to small mom-and-pop shops. If they have Web sites, visit each one and gather as much information about their products and 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 is perfectly legitimate to call company and ask for information from one of customer service representatives.
After gathering information, compile it into a table or spreadsheet. Identify areas that are weak or absent to identify possible market opportunities. For example, if you find that none or only a few of your competitors currently offer same-day delivery of products, this may mean that there is a market opportunity to serve a group of customers who must have your products same day they order them. Don't forget: You can charge substantially higher prices for convenience of same-day delivery of your products.
Ask yourself:
What products or services are my competitors not offering that I could offer profitably?
What competitive advantages do I possess that my competitors can't offer customers even if they wanted to?
What do my competitors offer that I could improve on?
Once you have a handle on your competitors, next you need to focus on your prospective customers. Conducting surveys is an easy way to find out your prospective customers' needs, buying preferences and spending habits, which in turn identify if they will make a good customer base for your company. Keep in mind that you should offer some sort of benefit or inexpensive giveaway to motivate customers and prospects to fill out your questionnaire. Some good examples include coupons or discounts on next purchase they make from your company.
Your survey must include questions that obtain information on 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 subject lives and where he or she purchases products and services.
This can be as broad as country or state in which they live, or as narrow as county, city and neighborhood.
Behavioral information — Includes information about how subject uses products or services.
Benefit information — Includes information about perceived benefits subject receives from products and services.
Finding groups of customers to take your survey can sometimes present a challenge. To find prospects, visit Web sites, newsgroups, forums and listservs, or contact non-competing companies that share your prospective target market. For example, if you own a health food store, you may contact a local health club to ask them if you could conduct surveys of their clients on their premises. In exchange for them allowing you to take advantage of their space and goodwill, you could offer their clients some sort of cross-promotional item. For example, give them a generous coupon for your products that is exclusive to members of that health club.
