Target Market

The target market is term that is used to identify the market in which a business operates in. In principle,  this market consists of a number of potential customers (who are willing to receive the offer) that the business is targeting with its products and services, since it is not feasible to target everyone everywhere. To be addressable, this target market has three main components that needs addressing first ₁

• Customer

  The customer is the main cornerstone of any business- a business that doesn't have customers is not really a business. This customer lives within a context and has certain pains, gains and jobs. A business therefore addresses customers by addressing these three elements with the value proposition that aims to ease pains, improve gains, and get jobs done. To be able to deal with this customer, entrepreneurs need to know where to find him/her and what this customer really needs. Check out Identifying a customer profile (Avatar) for more on the subject.

• Industry

  After addressing the customer, we need to know where the business is operating. What is the context, what does the market look like, and how much are customers willing to pay. All of these elements are considered as parts of the industry that the business works under. Learn more about understanding and identifying the industry here.

• Competition

  The last element in understanding the market is addressing and analyzing the competition. Competition can help businesses differentiate and bring what's best to the customer, but they also pose a significant risk on businesses, which is why building a competitive advantage is key to surviving and thriving in the business. Learn more about types and levels of competition in this article.

Identifying target market

The target market can be understood through the figure above. We have the general market (which is not the required target market), within this general market there is a large group of potential customers who can be reached and referred to as the market that can be reached, which is also not the target market.
If we look at the market that can be reached, we may attract a pool of potential customers for the product or service we are promoting. This is the wanted target market.
 
Example: Let's say we want to launch a restaurant and focus on the organic food lovers. The market has one million potential customers of people using restaurants. From this group, we find that our business can theoretically reach 200(K) thousand. From those 200K we find that only 100K are interested in organic food- thus our target market is the 100K.
 
Therefore, we see that defining the target market is a process that requires time and effort to define and clarify.

Tools used to identify a Target Market:

To identify target market components as mentioned above, usually a Market Research is conducted.

• This includes primary market Research (Conduct surveys, questionnaires, interviews);
• and secondary research (Other sources, reports, stats, trade associations).

Furthermore, some quantitative and qualitative questions must be answered, such as: Who are my customers are, What the industry is like, and who the competitors are.

Target Market pointers

Some pointers should be noted and considered in the process of identifying a potential target market in order to understand it better. These include:

• Nature of the target: Clarifying if the target is an individual customer (Business-to-customer B2C) or a business (Business-to-business B2B).
• The geography of business: When the business is operating in a traditional offline sense (Brick and mortar) it has a limited access to local customers. Businesses with virtual channels adopted (Click and mortar) have a more regional access and overseas. On the other hand, Business that are built solely utilizing virtual channels(Pure-play) usually focus on a global scale.
• The special needs: Some markets are identified by special needs or requirements. For example, various markets require "Halal" foods that needs to be addressed by local businesses or overseas businesses targeting this market.
• Understanding the demographics: When focusing on individual customers, it is essential to understand the characteristics of the target audience including the age, gender, income level, education, and other aspects as defined in the avatar .
• Understanding the psychographics: while demographics focus on customer characteristics, psychographics define the interests, attitudes, and behaviors of target customers.