How to Find Your Target Audience Through Market Research
Previously we’ve talked about how to identify and analyse your key competitors which precursors this a bit, so feel free to check that article out before continuing. But if you just want to know how to find your target audience – read on!
How to identify your target audience
The first step in identifying your target audience is to ask yourself: what kind of person or organisation would actually be interested in or buy your product/service?
It seems like there is a bit of a chicken and egg situation here – you need to identify a target market so that you can learn from them what your target market should be. So how do we break this conundrum? Look at the competitor research you have done – this should tell you which customers your direct competitors are already serving and marketing toward. Direct competitors’ customers are likely to be the same market you’re targeting.
What are their customers like? Who do they try to reach with their marketing? What groups or demographics do they fall into? As soon as you start to narrow down the shared qualities, activities or interests that your potential customers have, you can begin to understand how best to approach them.
Problem: I want everyone to be my customer
I know you’re expecting me to say something like – “not everyone can be your customer”, but in fact, there’s nothing wrong with your product or service having a universal appeal. The issue is that you won’t be able to effectively target everyone and you won’t be able to carry out market research on everyone.
It’s great that your product has a universal appeal, however, one of the issues you’ll have is that “everyone” has different ways in which they react to marketing so there isn’t really a “one size fits all” approach. Even services like Netflix which could be said to be aimed at “everyone” will focus their marketing on a specific show or set of shows, tightening their demographic and thus altering their marketing accordingly. You might be thinking, why on earth am I going on about marketing? But the idea here is that by narrowing your scope and casting your net a little less wide, you’ll be able to target your audience more effectively.
Imagine what a typical customer of yours might be like. This can be a challenge if your business idea seems to have universal appeal. If this applies to you think about this question:
“Say someone who didn’t know your business asked you ‘who are your customers’, what would you say?”
If you’re tempted to say “everyone”, then instead formulate several answers in each of the following forms:
You can use all the research that you gathered in this section and on your competitor analysis to determine who your particular audience ought to be. With a target in mind, you’ll then want to take a deeper dive.
Interviewing people – ask the right questions to get valid results
Interviewing people may seem laborious but it can provide you with insight into your target audience and in turn, how to market to them.
If you are planning to interview people, it’s worth spending some time making sure that you are going to be getting useful information.
Follow these 5 steps as you prepare to run a series of surveys or interviews:
First, talk to the right people. Target groups of people with your questions. Not everyone’s opinion is equal in customer research – you will get more valuable information from people who are likely to engage with your business in the first place.
Interview at least 150 people from your target group. If you are interviewing more at random you should increase the group size.
150 is a lot of people! Here are some ways to find them:
- Local Facebook groups
- Online forums
- Street surveys near competitor premises
- Telephone local/appropriate businesses and conduct phone interviews/surveys
Ask the right questions. Ask questions that relate both directly and indirectly to your business. Avoid yes or no answers in most cases.
Stay impartial. Don’t ask leading questions. Ask people how they feel about things, rather than telling them. You want honest answers, not just answers that support your business case.
Always ask the same set of questions. If you change the questions you ask it is likely you will get different results.
TIP: If you are talking to people face-to-face it’s useful to have two people doing the survey/interview – one to engage the interviewee and another to take detailed notes and watch out for non-verbal signs.
Bear in mind that if you are collecting information which could be used to identify a person, you have responsibility for the security of this information. Keeping data you collect anonymously avoids this concern.
It is likely that you may have more than one type of typical customer, in which case you will need to gather information from several different customer groups. But it’s better to be honest with this and do the work. It will pay off.
Different types of target market buy for different reasons and often have different considerations. The key to understanding your target market(s) is getting as much information as possible about their purchasing habits. Use this information to better target your market through marketing.
Using customer personas to understand your market
A customer persona is a profile you create for each type of person that may purchase your product or service. Personas are used to help ensure that a product appeals to its target audience and solves their unique problems. These people you create will be imaginary, however, they will be based on real data derived from real people.
You should start by listing things such as name, age & occupation, then you can broaden your personas to include things such as purchasing habits, needs, wants and desires.
For example, in a coffee selling business, you might identify a few different types of customers.
I’ve given them names so it’s easy to refer to them. Also, I tried to understand how and why they buy, what they look for in the market, and what kind of advertising they respond to.
I’ve identified 5 broad types of customers from my initial research: students, commuters, parents, local businesses and retired people.
Alice, commuter – Alice is a developer who commutes into London and back every day.
Bob, student – Bob is a student who arrives in town on an early bus and has a lot of free time.
Claire, full-time mum – Claire is a full-time mum, who meets with other parents in the park every week.
Danielle, office worker, Danielle works for a small recruitment agency in a large, busy office park.
Evan, retired – a retired hairdresser who spends a lot of time around town.
Once you’ve created a few of these, you can expand on them to include needs, wants, & desires. The ultimate goal here is to use your personas to gauge how your business can best appeal to them.
Putting your research to work
Don’t be afraid to adapt and change your approach based on the findings of your market research. That’s why you’re gathering this data – to make better decisions about your business.
By identifying your audience and combining it with your competitor research you’ll have a good idea of who your target audience are. You’ll know what they like and dislike and most importantly, their needs. You can start to build your business around this data, and it will help with your short and long-term planning. If you aren’t confident making decisions around this data, maybe you need more or better quality data.
From this, you should be able to see the importance of quality data derived from market research and the ways it can help shape your business. Remember to use the tips given here as well as in the previous post on competitor research to help you further.
How your target market affects your financial forecast
With both your competitors and your potential customers researched you can continue to experiment with your price points as we did in the previous article.
Pricing will play a big part in how appealing your product is to your target market. Price too high and people won’t buy it, price too low and you risk devaluing your product. It’s tricky to get right, but don’t worry because your pricing will develop over time as you gather more data.
Remember to use your personas to help you here. Ask yourself questions like “would Bob, the accountant, aged 26, with 2 kids buy this?” & “how does this solve Bob’s problem”.
Now, your competitors also have target markets, which they successfully sell to. Their customers are, currently, quite happy buying from them. If you want to compete with them on price, it’s important you don’t price yourself out of business.
What you want to start to understand at this point is how many sales do you need to break even, and the price points you think you will sell at.
At this early stage, you should have a basic understanding of the costs needed to run your eventual business. The numbers will still be evolving but it’s still a useful impression of how your finances will look.
You should now start to calculate how many units you’d need to sell each month to cover these costs using different price points. For example:
If my average costs for a month will be £8k and I am looking to sell a product for £25 then I know I need to sell at least 320 units to break even (8000/25=320).
So, look at your simple financial plan using:
- A low price
- Middle of the road pricing or your ideal price
- A high price
‘Low’ and ‘high’ should be dictated by your customer research. Use what it’s told you about how much people will be willing to pay for your product or service.
In each scenario, you’ll need to sell different unit amounts to breakeven. It’s good to have these numbers in mind as you plan your business.
When you are planning your marketing and sales activities later, you’ll already have an idea of what your targets are.
It’s never a bad idea to test out more pricing scenarios, the more data you can gather, the more prepared you’ll be when you enter the market.