Originally Published Apr. 28, 2019
The target market segmentation of your business is a crucial component to define within a business plan. When you envision the overall customer base for your business, it may incorporate people from a wide range of groups and walks of life. However, in target marketing, the goal is to break down that massive customer base and to define precisely who the most likely customer is for your brand so that you can target your marketing methods to reach that ideal customer more effectively.
In your business plan, lenders and potential investors who read it want to see your brand’s target market clearly defined to understand who you are marketing to and to understand the cost associated with your customer acquisition strategy. To better illustrate your target market segment, consider the following tips.
How to Define Your Target Market
Determine the Geographical Component
One representation of your target market is based on the geographical location of your customers. For example, if you are a small retailer, it may be likely that your market is within a small physical area around your business. This could be based on local addresses and expanded through innovation utilizing technology such as geofencing. A geofence is a virtual perimeter of a real-world geographic area that will allow your customers to receive promotions and notifications about your business as they approach a pre-determined physical location surrounding your business’s physical location.
Understand the Demographics
Another way to define your target market is to determine the demographics of your customer base. Some of the most common demographics include gender and age. Income may also be a critical factor in determining who your most likely customers are as well. This can also be as narrow as a specific age group most likely to interact with or visit your business. For example, if you’re launching an arcade business, statistically, your targeted market is expected to be comprised of teenagers and young adults, principally males.
Consider the Psycho-graphic Component
Determining your target market is essential in most industries. The psycho-graphic segment may include a specific type of consumer most likely to patronize your business. In the context of a childcare business, this would be parents.
It could also be someone more likely to live in an urban setting if you are marketing an urban apparel line. If you sell pet supplies, your target market is, of course, pet lovers. Sell motorcycle parts? Your target market is motorcycle riders.
Understanding the lifestyle of your customers is a guaranteed strategy to ensure the success of your enterprise.
Think about Ideal
In some cases, your customer foundation may not be solely based on who is most likely to walk in the door but instead on who you wish to appeal to in your marketing campaigns. For example, if you are a home furnishing brand, you may want to appeal to those looking for high-end home remodeling, not merely consumers making simple home repairs.
Compare Examples
To perfect your business plan further, look at examples of how well other companies do locally and globally in your industry. For instance, feminine product sellers tend to market during the daytime hours on television when customers are most likely watching television talk shows. Alcohol brands tend to advertise their beverages during sporting events and late at night. More so, that same alcohol company may market itself as a high-end luxury beverage to women and men during more sophisticated programming and offer different ads with more of a low-key approach during reality television programming.
Understanding your potential customers and where they spend most of their time is essential to advertising and marketing your brand. Understanding your target market segment is vital to your business plan and is a critical component of your business plan. Simply put, when defined correctly, potential investors and future business partners have a strategic blueprint for who your brand will market to and when.
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