How to determine your target market.

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Whether your company is a startup, or a more established small- or mid-size business (SMB), determining the size and characteristics of your target market is a critical step in developing an effective marketing strategy. It involves identifying who your potential customers are, how many of them exist, and what their preferences, behaviors, and demographics are. This process helps you tailor your products, services, and messaging to best meet the needs of your ideal audience.

Here are five (5) steps to effectively define your target market…

Step 1: Define Your Market Segments

Start by segmenting the market based on key factors such as demographics (age, gender, income, education), psychographics (lifestyle, values, interests), geographic location, and behavioral traits (purchasing habits, brand loyalty, usage rates). For instance, a luxury skincare brand might target affluent women aged 30–55 who value high-quality, eco-conscious products.

Step 2: Conduct Market Research

Use both primary and secondary research to gather data. Primary research includes surveys, interviews, focus groups, and direct customer feedback. Secondary research involves analyzing existing data from industry reports, government publications, trade associations, and competitor analysis. Tools like Google Trends, Statista, or census data can offer valuable insights into market trends and customer behaviors.

I need to stress a point here – direct customer feedback is invaluable. If you have limited resources, put them toward talking to potential customers and take good notes.

Step 3: Evaluate Market Size

Estimate the total addressable market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM). TAM is the overall revenue opportunity for your product or service. SAM is the portion of TAM targeted by your products or services within your reach. SOM is the segment you can realistically capture, considering your resources, competition, and capabilities. 

For example, if your business sells vegan protein bars, you would start with the number of health-conscious consumers, then narrow down to those seeking vegan products in specific regions.

Step 4: Create Customer Personas

Build detailed profiles of your ideal customers based on your research. Include characteristics like age, job title, buying motivations, pain points, and preferred communication channels. These personas help humanize your target audience and guide product development and marketing efforts.

Step 5: Analyze and Validate

Test your assumptions through pilot campaigns or product launches in small markets. Monitor customer responses and refine your targeting strategy based on real-world data.

The Takeaway.

Understanding the size and characteristics of your target market is foundational to business success. It allows you to focus your resources efficiently, develop products that meet specific needs, and craft compelling marketing messages that resonate with the right audience.

What about you? How does your organization determine its target market? What techniques do you think work best? Please comment – I’d love to hear your thoughts.

Thanks,
Tom Myers