By Liz Kudwa
A: This is something that everyone who is in business needs to know. Without understanding who your target customers are, you won’t be effectively using your advertising dollars and promotional methods, and you may not be selling as much of your product or service as you could.
The first step is understanding all the different ways you can describe your target market. There are several different types of segments – demographic, psychographic, usage based, benefits/features, and geography. Each segment looks at customers in a different way. Let’s take a closer look. When you segment your market using demographics, you’ll be looking at characteristics like age, income, occupation, education, etc… If you use psychographic segmentation, you’ll be looking at lifestyle preferences that different customer groups share, such as “music lovers”, “home improvement fanatics”, “rural dwellers”, etc… Usage based segmentation involves looking at the frequency with which something is used or done, such as time spent traveling or playing sports. Benefits and features segmentation involves looking at groups of people that find certain benefits/features desirable, such as the benefit of luxury, comfort or thriftiness. Desirable features might include all wheel drive on a car or HEPA filtration technology on a vacuum cleaner. Geographic segmentation simply involves looking at groups of customers based on where they reside. You can examine customers that live in a particular zip code, or county or state, etc…
You may use all of these methods for defining your target market, but you don’t have to. In some cases, only two or three methods of segmenting your market may be necessary. But how do you really know how to implement this to suit your needs? Let’s say you’re going to be selling a new kind of farm equipment. Who do you think the target market will be for this product? Start by examining the demographics. For instance, males between the ages of 25 and 45 who are farmers might be a good demographic on which to focus. The psychographic characteristic would be that these males live in rural/country areas and the geographic characteristic could be that these males primarily live in Midwestern states where farming is the prevalent industry.
You can use a combination of data from the U.S. Census to find communities where these conditions exist. Visit http://factfinder.census.gov to investigate the data and before long, you should have a good picture of which Midwestern states have the largest group of consumers that match the above criteria.
The more you understand about your customers, the easier it will be to sell to them. You’ll have a better idea of what motivates them and this knowledge is critical to designing an effective product/service, pricing it appropriately, positioning it correctly in the market, and even making improvements to your product/service. Knowing your customers also will help you use your advertising dollars more efficiently. For example, if your target market likes blues music, you don’t want to waste your advertising dollars running commercials on the country radio station. Identifying your target market may take a little bit of work up front, but it will save you time and money in the long run.
Elizabeth Kudwa is the Business Reference Librarian at the Capital Area District Library located at 401 S. Capitol Avenue in Lansing, MI. Contact her at 517-367-6301 or by e-mail at kudwae@cadl.org.
