Do You Know Your Business’ Target Market?
It seems like a simple question, that every business owner should be easily able to answer. Unfortunately, this is not the case.
Most small businesses are started by people who know how to do something well. Unfortunately for us, there are also people who start businesses that have no idea of what they are doing But thats subject matter for another day. Today, we are talking about people who have a skill and want to earn a living by performing that skill. Some are doctors, or lawyers, or architects. Others are electricians, plumbers, or pizza makers. Whatever your business, you need to know who is most likely going to be buying from you. If you ask any of these individuals, theyll say everyone is a potential customer. While that is true in the academic sense, when it comes to marketing your business, you need to spend your marketing dollars wisely. I guess its true that an eighty year old man might call a cosmetic surgeon for a nose job, but would you seriously spend money marketing to that person? While that may be a farfetched example, you must consider where to allocate your marketing budget to realize the best return on investment.
Most successful business owners market to populations of people that are most likely to buy their products or services. Whether you've been in business a week or a decade, you can make your business successful and stronger by targeting, as closely as possible, your target market.
The first thing that you have to do is to figure out what it is that you are selling, and to whom. I know that sounds like a ridiculous statement to make. Let me explain. Take the Airline Industry for example. The legacy carriers like American Airlines and United Airlines have been losing market share to the lost cost carriers for years. Their response has been to try and be everything to everybody. In addition to offering full blown service on their international flights, they try and match the lost cost airlines prices. Sounds good in theory, but American Airlines has lost 10 billion dollars in the last decade. Somethings not working. Its very hard to be everything to everybody, and to do it well.
Its not the same in the hotel business. I draw this parallel because both airlines and hotels are in the travel industry, and both have large corporations as the main competitors. As far as the hotel industry goes, on one hand you have Motel 6, which is a bare bones operation that targets price conscious consumers. On the other hand you have the Westin chain which is an upscale hotel chain that caters to people who desire more amenities during their stay. Each chain knows their place in their respective market. They realize that even though they are both selling hotel rooms, they are targeting different markets. The airlines could learn a lot from the hotel industry
So, who is your target market? Should you only market your products and services to one town? One state? One country? Online? Offline? Should you sell only one product or service to start? How often should you add others? These are important questions that need real answers before you start throwing your marketing dollars into the wind.
How do you find these answers, you ask? One way is to reverse engineer the problem. Lets say that you need to generate $10,000 worth of sales per month. Lets say that each sale brings in on average $100. Using the superior math skills that you learned in third grade, you determine that you need to make approximately 100 sales per month. At a one percent conversion rate, you would need to market to a population of 100,000.
At this point its quite easy to determine how far out you have to reach to market to a population of 100,000. Demographics are easily attainable to help you figure that out. Whether it is economically feasible to market to that population is another story altogether. Thats why it is vitally important to do your homework first.
Most small businesses are started by people who know how to do something well. Unfortunately for us, there are also people who start businesses that have no idea of what they are doing But thats subject matter for another day. Today, we are talking about people who have a skill and want to earn a living by performing that skill. Some are doctors, or lawyers, or architects. Others are electricians, plumbers, or pizza makers. Whatever your business, you need to know who is most likely going to be buying from you. If you ask any of these individuals, theyll say everyone is a potential customer. While that is true in the academic sense, when it comes to marketing your business, you need to spend your marketing dollars wisely. I guess its true that an eighty year old man might call a cosmetic surgeon for a nose job, but would you seriously spend money marketing to that person? While that may be a farfetched example, you must consider where to allocate your marketing budget to realize the best return on investment.
Most successful business owners market to populations of people that are most likely to buy their products or services. Whether you've been in business a week or a decade, you can make your business successful and stronger by targeting, as closely as possible, your target market.
The first thing that you have to do is to figure out what it is that you are selling, and to whom. I know that sounds like a ridiculous statement to make. Let me explain. Take the Airline Industry for example. The legacy carriers like American Airlines and United Airlines have been losing market share to the lost cost carriers for years. Their response has been to try and be everything to everybody. In addition to offering full blown service on their international flights, they try and match the lost cost airlines prices. Sounds good in theory, but American Airlines has lost 10 billion dollars in the last decade. Somethings not working. Its very hard to be everything to everybody, and to do it well.
Its not the same in the hotel business. I draw this parallel because both airlines and hotels are in the travel industry, and both have large corporations as the main competitors. As far as the hotel industry goes, on one hand you have Motel 6, which is a bare bones operation that targets price conscious consumers. On the other hand you have the Westin chain which is an upscale hotel chain that caters to people who desire more amenities during their stay. Each chain knows their place in their respective market. They realize that even though they are both selling hotel rooms, they are targeting different markets. The airlines could learn a lot from the hotel industry
So, who is your target market? Should you only market your products and services to one town? One state? One country? Online? Offline? Should you sell only one product or service to start? How often should you add others? These are important questions that need real answers before you start throwing your marketing dollars into the wind.
How do you find these answers, you ask? One way is to reverse engineer the problem. Lets say that you need to generate $10,000 worth of sales per month. Lets say that each sale brings in on average $100. Using the superior math skills that you learned in third grade, you determine that you need to make approximately 100 sales per month. At a one percent conversion rate, you would need to market to a population of 100,000.
At this point its quite easy to determine how far out you have to reach to market to a population of 100,000. Demographics are easily attainable to help you figure that out. Whether it is economically feasible to market to that population is another story altogether. Thats why it is vitally important to do your homework first.