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.

The “if you build it they will come” approach is pretty risky. Just because it worked in Field of Dreams doesn’t mean there’s any reason at all to think that your ideal customers—the ones who both need your product or service and will pay for it—are just going to magically find you and start showing up in droves with their dollars. There’s a greater chance that Kevin Costner will show up at your door in a baseball uniform later today.

“Don’t trust Kevin Costner for marketing advice” is probably a good rule of thumb.

Hear more about finding your target market with Peter and Jonathan on the twelfth episode of The Bcast, the official Bplans podcast:

Click here to subscribe to The Bcast on iTunes »

What is target marketing?

Target marketing is researching and understanding your prospective customers’ interests, hobbies, and needs so that you can focus your message and your marketing budget on the specific segment of the market that is most likely to purchase your product or service.

Identifying your target market: Who, what, why, how

Identifying your target market is part of business planning—notice that it’s planning as an ongoing action not just writing a plan as a one-time event. Gathering information about your target market, like business planning, shouldn’t be an exercise you do once and then never revisit. For as long as you are in business, you’ll always need to be thinking about how to better understand your ideal prospective customers.

One of your first steps in starting a business (or growing one) is identifying your market— the subset of the population who need and will pay for what you’re selling. Think of it this way: if your business idea is to revolutionize fashionable hiking shoes made from ethically sourced materials, it can be tempting to think that your target market is everyone with feet.

But realistically, the people most likely to purchase your shoes probably share some similar characteristics: they’re fashion-conscious but prioritize comfort over style. They would rather buy something that lasts for 700 miles than 200, even if it costs more.  

You can make some hypotheses, like that because of your price point, college students are less likely to buy them than people in their mid-thirties, or that people who live in areas where hiking and nature are easy to access are more likely to buy than people in dense urban areas.  Part of target marketing is identifying who your ideal customers are, and then testing your assumptions about them to make sure you’re not barking up the wrong tree.

You’ll want to be able to identify who your ideal customer is, where they live (or buy), what motivates them to make choices, and how they behave, or the steps they take in making a purchase.

Who: Demographics

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

“Our target customer is male-identifying, age between 28 and 45 with a relatively small family—a partner and 0-1 children. He works a white collar job and makes slightly more than the average median income.”

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.

“We think that our customers are more likely to live in suburban areas—zip codes with slightly above average median incomes, in areas with a relatively mild climate all year long, like San Diego.

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).

“We think that our customers probably buy one new pair of hiking shoes each year. They’re relatively loyal when they find a brand that works, but we think our socially conscious mission and the fact that no one else is manufacturing shoes like ours in the US will resonate with them.”

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?

“Our customers are generally not big impulse buyers. They want information on how products are made before they buy them, and they’re likely to do several online searches before they buy.”

All the examples above represent assumptions—things that you think are true about your ideal customers. But your work isn’t done. Now you need to do the work of figuring out whether your assumptions are correct, and revise them if they’re not. Finding out your wrong at this stage is actually something to get excited about, so don’t let your ego get in the way. You’re better off finding out that you need to shift your ideas (and your resources) toward another demographic than proceed with assumptions are incorrect or untested.

Researching your target market

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

Start with social. If you run social media profiles for your business, most social sites provide a free demographic breakdown of your followers in the backend analytics area.

Leverage email addresses. If you have your customers’ email addresses, services like TowerData can pull detailed demographic information for you.

Use Census information. 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.

If you’re already up and running, leverage your own sales data. 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 the busiest? When do purchases spike, and when do they fall, and can you develop any hypotheses to explain the fluctuations?

Ask your customers. 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 gender identity still makes a difference when it comes to patterns in purchasing decisions for a variety of complex reasons.
• How old are they? “18 to 49” won’t fly anymore. The majority of millennials and boomers have feet, but what they choose to put on them, and how they make purchases pretty different.
• 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 businesses can 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 an important tool.

Beat 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 multi-billion-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.

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.

Virgin Mobile is after young adults 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. Each one knows that their particular offering isn’t for everyone. They’re not just trying to market to everyone who needs or wants a cell phone. They’ve identified specific audiences with particular needs that aren’t being addressed by the biggest players in the marketplace.

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

Remember, identifying your target market isn’t something you do once and then check off a box. Up and running businesses should create systems to regularly ask your current customers feedback on what they like (and don’t 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 for 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. How can you do that for your own customer base? Research the types of loyalty deals your competitors even highly successful businesses outside of your industry are offering. Incorporate the research that you gathered on your target market to figure out what your customers are going to find most valuable.

Your knowledge of their hobbies, living situation, and typical job will help you craft loyalty programs that will resonate. Don’t forget to ask your customers what they think as you test out different programs. That direct feedback is the most valuable research that you can gather and will help you build a loyal 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.* Doing nothing won’t help your business, and it will almost certainly hurt it in the long run. The everything-but-the-kitchen-sink marketing plan where you throw resources into marketing to everyone with a pulse 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.

*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.