Identifying and Segmenting Your Target Market: A Step-by-Step Guide for Business Owners, Exercises of Business Accounting

Download Identifying and Segmenting Your Target Market: A Step-by-Step Guide for Business Owners and more Exercises Business Accounting in PDF only on Docsity! 1 How to Identify a Target Market and Prepare a Customer Profile Get your message to the people who need and want what you have to offer! This guide takes you through a step-by-step process that helps you identify specific target markets within your industry and provides you with the know-how to create customer profiles to better channel your marketing efforts. What You Should Know Before Getting Started  Types of Markets Identifying Your Market  Step One: Identifying Why a Customer Would Want to Buy Your Product/Service  Step Two: Segment Your Overall Market  Step Three: Research Your Market Sample of a Customer Profile and Analysis Choose the Segmented Target Market(s) You Will Send to Checklist Resources What You Should Know Before Getting Started In order to market your product or service, it is imperative that you tailor your marketing and sales efforts to specifically reach the segment of population that will most likely buy your product or service. It is critical that you first determine or clearly identify your primary market. Your energies and funds then can be spent more efficiently. If you don't know who your customers are, how will you be able to assess whether you are meeting their needs? Since success depends on you being able to meet customers' needs and desires, you must know who your customers are, what they want, where they live and what they can afford. We've all heard a business owner say, "My product is terrific! It appeals to everyone." Many of us have also seen small businesses that try to be all things to all people. This is a difficult, if not impossible, bridge to cross. 2 Targeting your market is simply defining who your primary customer will be. The market should be measurable, sufficiently large and reachable. For Example, a printer's target of mid-sized firms with mid-size projects is not a measurable definition. However, a target market of firms within a radius of 20 miles, with annual revenues of $10 to $25 million and a need for four-color printing runs of approximately 5,000 pieces is a clear definition. Once your target market is defined through your knowledge of product appeals and market analysis, and can be measured, you should determine whether that target market is large enough to sustain your business on an ongoing basis. In addition, your target market needs to be reachable. There must be ways of talking to your target audience. Types of Markets A market is simply any group of actual or potential buyers of a product. There are three major types of markets. 1. The consumer market: Individuals and households who buy goods for their own use or benefit are part of the consumer market. Drug and grocery items are the most common types of consumer products. 2. The industrial market. Individuals, groups or organizations that purchase your product or service for direct use in producing other products or for use in their day-to-day operations. 3. The reseller market: Middlemen or intermediaries, such as wholesalers and retailers, who buy finished goods and resell them for a profit. Identifying Your Market Here are three steps to follow when identifying your market:  Identify Why a Customer Would Want to Buy Your Product/Service  Segment Your Overall Market  Research Your Market cbr CONNOR BUSINESS RESOURCES each market segment.  6 Larger markets are most typically divided into smaller target market segments based on geographic, demographic, psychographic and behavioristic characteristics:  Geographic. Potential customers are in a local, state, regional or national marketplace segment. If you are selling a product such as farm equipment, geographic location will remain a major factor in segmenting your target markets since your customers are located in particular rural areas. Or, if you own a retail store, geographic location of the store is one of the most important considerations. Climate is a commonly used geographic segmentation variable that affects industries such as heating and air conditioning, sporting equipment, lawn equipment and building materials. Decide if your business is going to do business on a local, regional, national or international level. Identify the geographic region where your market is located. Identify specific boundaries within which you will do business.  Demographic. Potential customers are identified by criteria such as age, race, religion, gender, income level, family size, occupation, education level and marital status. Choose those characteristics of your demographic target market that relates to the interest, need and ability of the customer to purchase your product or service. For example, a target market for a real estate developer selling luxury vacation homes near Walt Disney World would include professional married couples approximately 30 to 45 years old with young children, and with incomes of more than $100,000. Another example of targeting through demographics is Liz Claiborne Apparel Company. They have named their target market; her name is Liz Lady. They know Liz Lady's age, income range, professional status, family status, hobbies and interests. Every decision from marketing to design is based on Liz Lady's profile. A demographic profile for a business would include such factors as customer size, number of employees, type of products, and annual revenue. If you are a business-to- business marketer for example, you may want to consider segmenting according to your target customer's size. A printing company may decide to target only magazine publishers that publish more than one magazine because they need high volume accounts to make a profit. Identify the following demographic characteristics of your market. 7 Consumer Market Age Income Gender Profession Education Family Size Homeowner Marital Status 10 Publication Environmentally Conscious Influencer Subscriptions Family Oriented Technical Workforce Type Management Style Other 11 Business Market Business Style Industry Leader Business Stage Innovative Employee Relations Conservative Trade Associations Socially Responsible Business Products/Stable Services Used 12 Employee Friendly Publication Subscriptions Workforce Type Management Style • Behavioristic. Products and services are purchased for a variety of reasons. Business owners must determine what those reasons are, such as: brand, loyalty, cost, how frequently and at what time of year customers in a segment use and consume products. It's important to understand the buying habits and patterns of your customers. Consumers do not rush and buy the first car they see, or the first sofa they sit on. A Fortune 500 company doesn't typically make quick purchasing decisions. Answer the following questions regarding your market. Reason/occasion for purchase? Number of times they'll purchase? Timetable of purchase, every week, month, quarter, etc.? Amount of product/service purchased? 15 Convenience of Use Convenience of Purchase Location Guarantees Store/Office Decor Payment Terms Other Step Three: Research Your Market Some or all these reference tools can be found in the reference collection of any public library or college library that supports local business or a business school. Federal Government Data: A great deal of demographic data is either free or inexpensive because it is collected and published by the federal government. The following publications are from the Commerce Department and Census Bureau.  Statistical Abstract of the United States (annual) Published by the U.S. Department of Commerce, this publication provides one-stop shopping for a demographic portrait of life in the United States. Tables include information on just about everything: school enrollment, voting patterns, employment projections, the federal budget, production figures, family income, public expenditures, vital statistics, labor force information. While the emphasis is on national information, many tables represent states and regions with a smaller number covering metropolitan areas and cities.  United States Census Every 10 years, the United States Census Bureau, in its attempts to count the number of people in the United States, gathers a vast array of data about its citizens. The most current Census is available in print format in many libraries. For the first time the Census is also available in CD-ROM. The Census Bureau also monitors the population through 16 its regular surveys, including the monthly Current Population Survey (CPS). The March issue of CPS contains household and income data. Contact the Census Bureau Call 17 Center at 301.763-4636 to obtain the annual publication Census Bureau Catalog and Guide, which explains publications available from the Census Bureau and how to order them. The customer service department of the Census Bureau can be reached at 301.763.4100.  County and City Data Book Contains data for 50 states, more than 3,000 counties or county areas, 243 SMSA's, and 840 cities of 25,000 inhabitants or more.  State and Metropolitan Area Data Book (annual) The SMA Data Book provides demographics for each state and metropolitan area, as well as counties and central cities. Commercial Sources of Demographic Statistics: Online databases and CD-ROM products have made it much easier than it used to be to sift through the mountains of information created by the Census Bureau and other gatherers of statistics. For a complete listing of demographic and other databases, consult the Gale Directory of Databases (available at most large libraries). The following sample of databases is available through database vendors such as Dialog. You can also use online search engines such as Yahoo! and Google to find database compilers and other vendors.  Population Demographics from Claritas. The Population Demographics database provides access to the decennial Censuses, as well as estimations and projections developed by Claritas. The database provides census information in an easy to use and comprehensive manner. Information can be searched by a variety of fields, including age, sex, race, industry, occupations and geographic areas. Current year estimates and five-year projections are also available for certain data.  ESRI reports The company that publishes the Sourcebook of Zip Code Demographics and Sourcebook of County Demographics, listed below, invites you to order brief local demographic reports online. 20 you want to segment. Most major publications have demographic and behavioristic profiles of their readership. If you're a manufacturer of a part used in printing presses, a magazine focusing on the printing industry can provide you with valuable segmenting information. Simply call the advertising department and ask for a media kit. While you're talking to 21 the publisher's representative, ask if there are any regular or special articles you should see for useful trade and demographic statistics.  Requesting a customer-organization's annual report will provide you with business demographic information.  Work with a local college. If you need help in designing and executing a market survey, contact a marketing professor at a nearby college and offer it as a class project.  Identify your potential customers and question them. For Example: Career Options might go to the state unemployment office and conduct a survey or visit a local college and conduct a survey among college seniors.  Trade associations can provide valuable information for industries not only on demography and market size, but on competition and trends for growth areas as well. Trade associations usually sponsor trade shows. A printer serving the magazine market would attend a trade show for that industry. But if this printing company was considering targeting new markets such as book publishers or greeting card publishers, then attending trade shows for those industries would be a prime way to identify and question potential customers. 22 Sample of A Customer Profile and Analysis Career Option's Sample Customer Profile: Professionals in Transition Segment Gender: 3 0 % F e m a l e 7 0 % M a l e Age: 10% 26-30 30% 31-40 30% 41-55 30% 56-64 Income: 25% 30-40K 25% 40-50K 50% 50-75K Marital Status: 80% Married 20% Single Level of Education: 60% Bachelor's degree 40% Master's degree Occupations: 10% Health Care 20% Financial 30% Marketing/Advertising 40% Hi-Tech Fields Job Sought: 70% Same Field 30% New Field Most Important Benefits: 1. Assistance in finding work quickly. 2. Want a better job. 3. Want equal salary or increase. 4. Stability. Psychographic Summary: This segment closely associates work with self-esteem. They feel