This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!

If you build it, they will come.

That’s what I believed, when I was first starting out. I assumed that if I opened a business, customers would just show up—no major marketing effort required. Other entrepreneurs take the complete opposite approach, and treat marketing as if it’s the 1916 Battle of the Somme: they throw all of their resources in the general direction of their intended audience and hope something hits its mark.

Hear more about finding your target market with Peter and Jonathan on the twelfth episode of The Bcast, Bplan’s official podcast:
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Fortunately, in-between these two approaches is a strategy that actually works: target marketing.

What is target marketing?

Target marketing is about attracting customers who will buy what you’re selling.

Of course, there’s more to it than that. After all, you’re not a magnet and this isn’t The Secret—in order to target market effectively, you’ll need to know exactly who purchases your products and exactly how to to reach them. And acquiring that kind of knowledge requires some research and planning on your end.

The evolution of target marketing

Target marketing is the most current method of marketing to consumers based on research into their interests, hobbies, and needs, and it didn’t spring from nothing. Before we got here, advertisers and marketers were using cohort marketing, and before that they were using generational marketing. Target marketing is essentially a refinement of these ideas.

Generational marketing

Prior to the 1960s and 70s, most American adults—depending on their gender—more or less followed a similar life script. For men, it was to join the military or go to school, get married, start a career, have kids and then, after 30 years with the same company, retire with a nice pension and a gold watch. Their wives stayed at home and did the real work of running a household and raising kids.

For businesses back then, marketing was easy. If you were a small business, you knew all of your customers by name. And if your company was big enough, it had only a few marketing options: place an ad in the local newspaper, or in one of a handful of national magazines, or on one of three broadcast TV networks. From a marketing perspective, people were dependable.

Blame it on the Beatles or disco, but by the early 1980s everything had changed. Advertisers came up with what they called “generational marketing”—instead of defining everybody by gender and stage of life, they began to consider things like demographics and socio-economic factors when targeting customers.

Cohort marketing

Marketers soon realized that even generational marketing wasn’t going to be enough to keep up with the seismic shifts in American culture and attitudes. Despite coming of age at the same time, lots of people were behaving quite differently.

With advances in technology like credit cards and store loyalty programs came a solution: cohort marketing. Suddenly it was possible to market to people based on their past purchases and buying patterns, because we could track those purchases and buying patterns. And as it turns out, this is a highly effective method of grouping consumers for targeted advertising.

Today, things are changing faster than ever before, and we have access to more data on our consumers than ever before. It’s a pretty incredible time to be in marketing.

Identifying your target market

Hopefully you’re here because you’re serious about building and growing your business—this is a good place to start putting your plan for world domination into action.

One of your first steps in starting a business (or growing one) is identifying your market. Once you’ve identified your market, you can begin targeting the people who will pay for all of your business’s explosive growth: your customers!

Your target market can be broken down into four “who, where, why and how” components:

The “who”: Demographics

Who needs your product or service? Include basic demographic details such as age, gender, family size, educational level, and occupation here.

The “where”: Geographics

Where are your customers? These are the places your customers can be found (i.e., their zip code), and be sure to learn details like the size of the area, its population density, and its climate.

The “why”: Psychographics

Why do your customers make the choices they make? This is personality and lifestyle information that will help you figure out your customers’ buying patterns. For example, if you know why your customers buy your product, you can figure out how much of your product they need and how often they need to buy it. Also consider what benefits you can provide over your competitors, and how loyal your customers are to you or your competitor (and why).

The “how”: Behaviors

How do your customers behave? All customers are buying products to fulfill a need, but how do they regard that need? How do they regard your product? How much information do they have on this need or how your product fulfills it, and what are their information sources?

Researching your target market

New technologies can make nailing down your demographics and psychographics much easier (and cheaper) than in the past.

If you run social media profiles for your business, most social sites provide a free demographic breakdown of your followers in the admin area. If you have your customers’ email addresses, services like Rapleaf can pull detailed demographic information for you. If you have your customers’ zip codes, there is a ton of free information available to you from the U.S. Census Bureau—it might not drill down to your exact customers’ households, but it’s free and it’s a very good starting point.

Data from your payment processor or inventory history could also be helpful. What are your customers buying, and when? How much is the average purchase in your store? What time of day is busiest? When do purchases spike, and when do they fall, and can you develop any hypotheses to explain the fluctuations?

You can also use email, phone, or in-person customer surveys. You don’t necessarily need large numbers of participants to learn more about your customer base—you might be surprised how much you’ll take away from just 5-10 good conversations. If you’re worried about being able to recruit survey participants, offer a free gift or store credit.

At the bare minimum, these are the things you should know about your target customers:

  • What is their gender? Yes, this is the 21st century, but women and men still make very different purchasing decisions for a variety of complex reasons.
  • How old are they? “18-49” won’t fly anymore. Millennials and Boomers are as far apart as Google Glass and those big green sunglasses your grandmother bought to wear over her prescription lenses. You love your Gran, but she’s not buying your new Machete Tyrannosaurus 3 app. Sorry, she’s just not.
  • What are their interests or hobbies? Finding out what people are into will help you connect with them. Even if they don’t buy from you, you’ve made a new friend. Everyone needs friends.
  • Where do they live? Is geography a limiting factor for your customers (or for you)? Are they able to get to you easily? Is there plenty of parking? Public transportation? Can you deliver? I once purchased a coffee shop tucked in a strip mall between an antique store and a Gold’s Gym. On the upside, most of my 12 or so regular customers were either super fit or could fix an old watch.
  • How do they make a living? Knowing what your primary customers do can help you adjust your hours to fit their needs, or help you devise special offers. People like to feel special.
  • How much money do they make? Whether you’re selling gold-plated sailboats or glow sticks in bulk, it’s a good idea to know how much—or how little—your customers are willing to spend.
  • Do they own their own homes or do they rent? Depending on the answer and what you sell, you may need to tweak your messaging to resonate with your audience.

The key here is to collect information, and then compare it to the assumptions you’ve made about your customers. What’s surprising? What strikes you as an untapped opportunity? Did you hear the same or similar complaints/suggestions from multiple people?

This may also be a good time to create a buyer persona for your business, and/or to conduct a SWOT analysis of your business, so you can develop a fully fleshed-out business strategy.

How to use target marketing

Whether you’re still in the process of starting your business, looking for an innovative opportunity to grow your business, or want to protect the business you’ve already built, target marketing is a tool you can employ.

Beating your competition in niche markets

If you’re opening a bookstore or selling sporting goods, you’ve got some big-time competition. Mega-retailers like Amazon and REI aren’t just going to give up a piece of their pie to a scrappy upstart. Lucky for you, we’re living in the days of the niche market! You can use target marketing to carve out your own space in the marketplace.

Case study: The wireless industry

The wireless industry is a great example of small businesses succeeding with niche markets and target marketing. The biggest wireless providers—AT&T, Verizon, Sprint—are focused on the biggest markets, and they have shareholders to answer to every quarter; despite being multibillion-dollar companies, they don’t have the resources (and it isn’t in their best interest) to staff their support centers with multilingual employees or to offer the most competitive rates on cell phone plans.

So you know what they do instead? They run wholesale divisions that sell small businesses the rights to their wireless networks, and those small businesses then run after the niche markets whose interests and needs are ignored by the big wireless companies.

Target marketing in the wireless industry - Children's phones

Kajeet’s target market is parents who want restricted cell phones for their children.

SIM Shalom targets Israeli-American immigrants by offering Hebrew-language support and cheap calls between the U.S. and Israel; Kajeet targets parents who want to offer restricted phone lines to their young kids, offering the ability to turn off the phone’s network during certain periods of the day (like school hours, or bedtime) and to block certain phone numbers or websites, as well as the ability to activate GPS notifications so that parents know when their child has arrived at after-school activities; Consumer Cellular targets senior citizens with simpler plans, a curated selection of phone options, a focus on affordability and reliability, and a partnership with the AARP; GIV Mobile targets community-minded individuals who are looking for ways to “give back” by offering to donate 8 percent of a user’s monthly bill to a charity of their choice; and Virgin Mobile is after the youths, with “back to school” marketing campaigns, pay-as-you-go plans with no credit required, casual website and marketing copy, and a focus on trends.

Identifying and focusing on target markets is what defines each of these businesses. Identifying and focusing on target markets that their competitors aren’t addressing is what makes each of these businesses successful.

Today, finding out what your competitors are (and aren’t) doing can be as easy as running a Yelp search. Studying your competitors’ customer feedback can help you identify blind spots in their businesses that you can exploit for your own gain.

Build a loyal customer base

If you’re doing things correctly, you’re asking your current customers what they like about doing business with you.

The great thing about getting to know your customers is that not only will you be able to track down new customers just like them, but your tried-and-true customers will become more loyal—and spend more money!

Case study: Sephora

One example that comes to mind is Sephora, a makeup and skincare retailer. My wife shops there for her makeup and skincare almost exclusively—why?

When I asked her, she didn’t say that she shops at Sephora every time she needs makeup and skincare products because they’re the only place that sells particular items (they aren’t), or because they have the best selection (they don’t), or because they offer free shipping (only on orders greater than $50, apparently).

The answer was that she gets “really good” free samples with her order, and that she accumulates reward points with every purchase for even bigger and better free samples later. Even better, the selection of free samples is always changing, and she gets to choose the samples she wants from a wide selection of options.

By handing out free samples and—even she admitted—pretty-close-to-worthless reward points, Sephora’s gained an extremely loyal customer.

Would this strategy work on everyone? No way. But it works really, really well on a 30-something woman who wants to feel like her favorite mascara/eye cream/perfume is worth the hefty price tag.

Clearly, Sephora’s tapped into the psychographics of their target customer base.

Getting to know your customers, and giving them what they want, is a surefire way to build a loyal customer base—the kind that gives your business 5-star reviews online, and that tells all their friends about how much they love you. (You know, the kind of customers you want.)

In conclusion

The only thing I learned from my do-nothing plan was to never take marketing advice from a disembodied voice in a Kevin Costner film. Had I done any research at all, I would have known that’s not even the real quote.* The everything-but-the-kitchen-sink marketing plan usually ends in similar disappointment: a lot of zeros on the bank statement, and all in the wrong places.

Target marketing is going to require some upfront work, but the rewards are huge, and well worth the effort.

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*The correct quote is, “If you build it, he will come.” Which is, in fact, more representative of the number of customers I attracted with my old marketing plan.

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Michael Kerr
Michael Kerr

Michael Kerr began his professional life as an entrepreneur. He built and managed a number of successful businesses before returning to school to indulge his passion for writing.