Defining Your Target Markets

The first step for any business is to define your main target market. Grouping together customers based on markets will help you clearly define prospect and customer needs.

One way to proceed is to first look at defining your main target market. After this is done, you may need to define additional secondary or specialized markets.

Definition of Markets & Niches

Target Market: A target market is your main subset of prospects and customers. They have similar wants and needs. The overall size of your main target market is not important, but your ability to understand their desires is critical.

Secondary Market: A secondary market is a similar group of customers that, while not providing your main source of revenue, is still profitable. For example, a commercial roofing company may find that they have a secondary market providing residential roof repair and replacement. The residential market may not be their main target market, but it still provides a solid revenue.

Niche Market: A niche market is a group of prospects and customers with a very focused need that others are not providing. A graphic designer may discover a niche market need for creating ebook covers.

The easiest way to begin defining your primary, secondary and any possible niche markets is to look at your past clients. Create a spreadsheet of past customers by creating column headings. You can start with customer name, business name, industry type, services and/or products purchased, and total amount spent over a particular time period.

Start looking for patterns in the data. You should be able to see areas where similar customers and companies may be grouped by types of products purchased and/or company function.

You may find that some companies tend to take quite long in the buying process while other customers tend to purchase impulse-type items. Let the data help you decide how to group together your prospects and customers into definable markets.

Looking for patterns like this will allow you to start grouping customers by different attributes. There is no right or wrong way to do this. Just work to uncover any patterns in the types of customers that buy from you.

Check Out the Competition

When defining your markets, make sure you spend a little time checking out the competition. Who do they seem to be targeting with their brochures and catalogs?

Ask yourself the following questions to really determine if you have a potential definable target market.

1. Does my product help this customer group solve a common problem or issue?

2. Can I provide enough differentiation between my products and those of my competitor?

3. Will this target market pay full price for my products and services?

Chances are, as you grow your business, you uncover additional market opportunities. As long as you can define the needs within the new group, add them as a secondary or niche market.

An Example of Defining Markets

Here is an example of how a commercial roofing business might define their target and niche market areas.

Primary Target Market: Industrial & Commercial Buildings

Secondary Target Markets: Residential Repair, Real Estate Managers

Niche Markets: Hospitals, Elementary Schools

Defining your primary, secondary and niche markets allows you to really understand the needs of your various customers. Once you understand these needs, you’ll be in a position to develop compelling and relevant solutions for them. This is the most efficient way to grow your small business.

Corte Swearingen has written many articles on uncovering target and niche markets. He is the creator of the SmallBiz Marketing Strategy Website - a site designed for helping small business owners grow their sales through the power of strategic marketing.