How to Define Your Target Market

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A clear definition of your target market is a critical component of your marketing strategy. It is the who that guides your what, when, where, why, and how.

A target market is the specific group of customers to whom you will sell your product or service. When we divide that market into smaller groups based on shared characteristics, that is segmentation. Here, we’ve outlined the basic steps to creating detailed target market definitions, but if you need expert help along the way, Freshwater Marketing is here to assist.

 

Market definitions should be supported by research

 

Although the opinions of marketing and sales personnel as well as those of the leadership team are important, solid target market descriptions should be informed by market research. The understanding of your target customers is so central to the success of your marketing strategy that you cannot risk relying solely on unsubstantiated information.

 

Market research for use in defining your target market is usually secondary information, meaning it has been collected and analyzed by someone else already. Good sources for this information include:

 

  •    –  Industry studies or reports
  •    –  Government publications
  •    –  Trade publications’ annual survey results
  •    –  Annual reports from your publicly-traded competitors
  •    –  Market analyst reports
  •  

The list above will give you several places to start gathering information. Be sure to take your time and collect as much market information as you can. Often, two reputable sources will contain conflicting data, so it’s important to have a complete picture to know which data to trust.

Building out your research-based definitions

 

To create your target market profiles, describe the customers you’re targeting, giving as much detail and being as specific as possible. These descriptions should include:

 

  •    –  Company type (i.e. “wholesale parts suppliers”)
  •    –  Industry (i.e. “Automotive Industry”)
  •    –  Company size: revenue range, number of employees, number of
           locations, etc.
  •    –  Geography
  •    –  Additional descriptors that make this market unique
  •    –  Market size: how many companies are in this market? What is
           their combined total revenue?
  •    –  Market potential: How much revenue/units/etc. can be 
           generated/sold/etc. to this market per year?
  •  

Next, you’ll want to divide your target market(s) into sub-groups called market segments. To do this, group together the companies in your target market(s) by common traits such as similar needs, geographic location, company size, or any other characteristic that will impact how you market to them.

 

A good place to start is to think about companies which will use the same product or service, those which will be transactional customers vs. long term strategic customers, or those who will buy direct vs. going through one of your distributors.

Complete your target market profiles

 

Now that you have a solid understanding of the sales potential and relevant characteristics of each of your target market segments, it’s time to give yourself and your team the full picture.

 

First, list all of the products and/or services you’ll offer to each of the segments you’ve defined. Later, you can group segments with common products and services together to help you focus your product-specific communications.

 

Next, note the top 3-5 target customers in each segment. This will give anyone using these descriptions a shorthand for understanding the companies you’re describing. 

 

Finally, note the top 3 competitors for each of those segments and products/services. This is a critical component which will inform your competitor analysis

Need help defining your target market?

Find out how we can help define your target markets and deliver more effective marketing strategies.

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