One of the biggest challenges in business can be identifying your target market. Who are they? Why do you need to know who they are? What benefit is it to you and your business?
I have heard many people try to educate others on how to identify their target market and why it is important. I have struggled to educate people myself. At a recent BNI meeting I had 10 minutes to educate other business on my business. I pointed out my target market, I could hear the gasps and whispers in the room. Oh my god – she just said she ONLY works with women between the ages of 28 and 45! When in fact, that was not at all what I said! What I said was that the demographic that was MOST profitable to me was women between the ages of 28 and 45. Does this mean I have no male clients? No it doesn’t! Does this mean I have no clients younger than 28 and older than 45? Nope!
This is my best effort to explain it to you and I hope it makes sense. If it doesn’t, you're no worse off than you were before!
Firstly – your target market (in my words, not in business text book words) are the customers that have the longest lifetime value to your business. They are the most profitable to your business.
Think about a Fish and Chip Shop (mainly because I am hungry, but also because it is a nice simple way for me to explain using a “fishy” analogy). The Fish and Chip Shop need to sell $20 worth of product to make 150% profit. The profit declines as the average purchase declines. The aim is to attract the customer that spends a minimum of $20 in one transaction. They use only the best quality products including low cholesterol oil.
The Fish and Chip Shop has a very smart, gorgeous, funny business coach (hmm…who could that be?). The business coach suggests that they need to do some advertising but on a limited budget - the Fish and Chip Shop want to make sure they get as much bang for their buck as they can.
How do they accomplish this? Simple… Advertise to the clients who have the largest value to your business. The most profitable customers are the ones we want to attract!
These are the clients that
Purchase regularly (1-2 times per month)
Purchase more than $20 of food
Live close to the shop
See value in a quality product
These are NOT the clients that
Purchase sporadically (3-4 times per year)
Purchase less than $20 of food
Do not live close to the shop
Lets now consider the types of clients the Fish and Chip Shop attract. This is clearly not an accurate full list, but stick with me, it will start making sense!
Now lets think about whom from that list you want to advertise to? The immediate answer most businesses give is “everyone is my customer”. While this is true, not every customer is profitable.
Who do you want to advertise to? Is it the single man, the teenager or the family? Of course it is the most profitable which is the family. A family doesn’t make the decision to purchase together – usually mum and dad make the decision so we have just broken your target down even further!
From figuring out who is profitable, the Fish and Chip Shop can now use their marketing dollar to influence mums and dads who live within 2kms of the store. Instead of spending $1000 on an advertisement in a newspaper circulated to an area 4 km outside of the shops location that is mostly read by retirees, we can focus efforts on a letterbox drop to homes (not units or retirement villages) in a 2km radius of the shop.
This is of course an overly simplistic view and I have no clue how profitable a serve of flake, chips and scallops are but I hope that helps you understand why you need to identify your target market.
Small Fish Business Coaching Gold Coast