Qualified leads are the group of people most likely to buy from you—they have a current need, problem or desire that your offering will solve or serve. These people are your target market, or ideal customers. Qualified leads are generally easier to convert into customers, so a high number of qualified leads mean a high conversion rate and, of course, more sales.
A great example of how this can go wrong: You own a hamburger business and are standing outside a large convention waiting for the lunch break, to take advantage of a huge rush of people in a short period of time (a great way to do business) by giving away small hot dogs to generate customers for your business down the road. You have prepared all your toppings, flyers with simple directions, arranged for staff to handle the rush and stocked up mightily to ensure you do not miss a single prospect. The group comes out and you manage 25 free hot dogs given away when you were expecting 500.
What went wrong? You did not realize the convention was a health and wellness group comprised of 95% vegetarians. Moral of the story: if you are talking to the wrong audience it doesn’t matter how good your offer is, you are wasting your time. Talking to your target market is absolutely critical to successful marketing.
So, your first job as a business owner is to figure out who your target market is, and how the people in it think and behave.
A target market is simply a group of people with something in common. Your market can be broad or specific in scope, and it is unique to each business or industry. Knowledge and understanding of your target market is crucial to the viability of your business. You have to communicate with your customers, and understand their behavior.
Without a comprehensive understanding of your target market, you can’t make smart choices about your products or services, pricing, offers or marketing strategy. It’s kind of like driving a car with a blindfold on, you’d be headed for disaster.
You likely already have an idea of who your target market is—or who you want it to be. Start by describing who you think your target market is in two or three sentences.
As you work through this process, you may find that you were correct in your assumptions—or not. Either way, you will discover invaluable information about your audience.
When you set out to identify your target market, you need to find the group of people that have:
– A particular need, want or desire.
– The financial ability to purchase your solution to their need, want or desire.
– The power to decide to purchase your product or service.
– Access to your business through a physical location, website or catalog.
To find the group of people with these characteristics, answer the following questions about your product or service:
1. What is the need, want or desire that my product or services fulfill? Is it a need or a want?
2. What does my product or service cost?
3. Who makes the decision to purchase my product or service? (For example, if you provide a product or service for children, their parents make the decision to make a purchase.)
4. How are my products or services accessed? Does your ideal customer need to live in the same city or region as your business? Or can they access your products online?
Now let’s look at the demographic and psychographic characteristics of the people that need, can afford, can access and decide to purchase your offering.
Age: In general terms, what is the age range that my product or service caters to? Kids? Teens? Adults? Seniors? Baby boomers? GenX? GenY?
Income: How much do consumers have to make to afford my product? Single or double household income? Low? Medium? High?
Gender: Does my product or service appeal to men, women or both?
Marital Status: Are my customers married? Single? Divorced?
Occupation or Industry: Does my product or service appeal to people in a certain occupation, or industry?
Family Size: Does my product or service cater to large or small families? Is family size relevant?
Education: What level of education do my primary customers have? High school? University?
Nationality, ethnicity, religion, language: Are nationality, ethnicity, religion or language relevant to my product or service?
Psychographics are the qualitative characteristics of your target audience such as personality, values, attitudes, interests or lifestyle.
Lifestyle: What kind of lifestyle group does your audience fall into? Are they conservative or trendy, travelers or soccer moms? Are they thrifty or extravagant?
Values and beliefs: What are their values and beliefs? Would you consider them environmentalists or safety conscious?
Attitude: Are they positive or negative? Open or critical? Easily led or opinionated?
Motivation: Are your customers opinion leaders or followers? Do they tell others what products they need, or do they need others to tell them what is trendy and what works?
Activities and interests: What do they do in their spare time? What are their hobbies and interests?
Social Class: What social class does your audience belong to? How much extra money do they spend on luxury items?
So, now that you’ve gathered all this information, what does it tell you about your ideal customers? You’ve done enough research now to create a picture of who you think your ideal customer is. Being as specific as you can, write a 1–2 sentence statement about your target market.
My target customer is a successful young professional: A middle-class man aged 20–35 who is single, makes more than $50,000 per year and is physically fit. He is university-educated and has an active interest in economics and politics.
My target market is affluent new mothers: Married women with children under 5 years old, between the ages of 25–45, with a household income of at least $100,000 annually. She is the trend and opinion follower, and her purchase motivations are driven by her peer group.
Now that you’ve made some educated assumptions about who your target market is, you’ll have to use some market research strategies to confirm them. Market research is the study of a particular group of consumers, or markets. It is one of the most valuable activities you will work on as a business owner, since it keeps you connected and informed about your customers’ thoughts, motivations and behaviors. Market research minimizes risk and assumption-based decision making
Market research needs to be conducted regularly, regardless of how long you have been in business or how well you know your target market. Trends shift, and environments are affected by economic and political factors beyond your control.
Basic demographic research is something you won’t have to conduct yourself. Every city, town or region will have demographic information available online or in city halls, libraries, chambers of commerce and business centers. Research on general consumer behavior and purchase data can be extremely useful for small businesses.
There are two main types of market research—secondary and primary—and three main areas of market research—consumer, competitor and environment.
SECONDARY – Second-hand data or research that has been completed by someone else, but can be applied to your objectives
> statistics on area population
> trade journals
> public surveys by larger companies
> government publications and surveys
> consumer reports
PRIMARY – Firsthand information gathered from your customers or about your customers and target market
> info from existing customers through surveys or questionnaires
> what works, what doesn’t work for your competition
> types of products that consumers are currently interested in
Primary market research strategies you shouldn’t miss:
Spend some time in your local area at different times of the day observing and talking to the people who live, work or spend time there. What do you notice about the neighborhood? Is anything missing? Get a sense of their age, gender, clothing and any other features.
If you have direct competitors in the same local area, spend some time being “their” customer and making observations about their business. How do they advertise? What market are they targeting? Is there a niche that is being missed?
Take your time to administer surveys carefully and thoughtfully; surveys can get complex and variables can be high. Keep your questionnaire short and focused on soliciting the information you need to answer your market research question. This will encourage a higher response rate.
Remember that your information will only be as good as the people you ask for it. Try to get as broad a cross-section as possible. Depending on your market research question, you may not want to limit it to your existing customers.
Choose a survey method—telephone, web or paper-based—and understand the pros and cons of each. Research some survey templates, and spend more time than you think you need to on crafting your survey. Include basic demographic questions on your survey so you can cross-reference responses with factors like age, income, sex and profession.
Use a website tracking system like Google Analytics to monitor how visitors to your website behave and use the information available. These programs will allow you to see how many people visit your site, where they are from, what pages they are looking at and how long they spend on your site.
Customer Loyalty and Purchase Data
Your point of sale system—depending on the level of features it offers—may also be able to run reports on customer purchase patterns and trends. If you have a customer loyalty program, you can keep track of purchase information in each customer’s file or account. The type of information you’ll need to keep track of here is behavioristic: brand loyalty, product usage, purchase frequency and readiness to buy.
Assemble groups of 6–12 people and ask them general and specific questions about their thoughts, opinions and habits as related to your marketing question. Be sure to assemble a cross-section of people that is representative of your target market.
When you’ve completed your market research, analyze what you’ve learned. Were your original assumptions confirmed or refuted?
Does my target market exist in my geographic area?
Does my target market actually want what I’m selling?
How does my target market want to purchase from me?
Is my target market interested in my new product or service?
How does my target market want me to communicate with them?
Is my target market large enough in my local area to support my business?
Are there areas of my research I could explore for more information?
You may discover some hard facts to face about your business. Perhaps there is not a large enough market base in your area to support your business. Maybe you’ve spent thousands of dollars going after the wrong type of customers. This is all okay; it’s valuable information that you can work with to make better decisions about your marketing strategies and product or service offerings.
If you have flexibility in your product or service, you may be able to find ways to enhance your offerings and extend your target market to include more people, or a larger share of the marketplace.
Your market research is ongoing—each time you talk to a customer, supplier or sales rep, you’re gathering information about your clientele, and thus conducting market research. Keep a log at the point of sale for staff to use to record customer comments and complaints.
Remember, audiences, trends, products and services change, so stay ahead of the curve and keep on top of your market.
Plan to make market research a regular part of your business, and schedule time and money for primary research at least once a year. This is the only way to stay ahead of the competition when it comes to trends and environmental changes beyond your control.