Successfully running a small, local business isn’t easy. Business owners face a host of challenges, everything from competition with large, national enterprise organizations to maintaining adequate cash flow, hiring the best people and identifying products and services prospective customers want.
The challenges of running a small business are one of the reasons so many fail. According to Fundera, for example, about 1 in 5 small businesses grind to a halt in their first year—and about half close shop before their 5th year.
The good news is that many small businesses not only survive but experience remarkable success. The winners are the ones that make prudent financial decisions, leverage best practice leadership skills and implement innovative, forward-leaning marketing strategies.
The Heart Of A Sound Marketing Plan: Identifying Your Target Market
Most marketers have a reasonably good grasp of what prospects are most likely to buy their products and subscribe to their services. They tend to be consumers who are in broad outlines like their current customers. For this reason, a realtor looking to sell luxury homes wouldn’t advertise in the local Penny Saver. Neither would a local business throw out a large net that captures prospects on the other side of the country.
But here’s the problem: because marketing dollars tend to be scant, to achieve a reasonable return on investment (ROI), marketers need a far more nuanced understanding of who constitute their ideal customers. Those prospective customers, when effectively defined, are sometimes referred to as a company’s “target market.”
As Small Business explains, target marketing holds several key benefits for local companies:
“Target marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments consisting of the customers whose needs and desires most closely match your product or service offerings. It can be the key to attracting new business, increasing sales, and making your business a success. The beauty of target marketing is that aiming your marketing efforts at specific groups of consumers makes the promotion, pricing, and distribution of your products and/or services easier and more cost effective and provides a focus to all of your marketing activities.”
What Are The Main Benefits of Target Marketing?
Every local business is different, with different goals, different marketing challenges, and different products and services. For most, however, a robust target marketing strategy will reap several key benefits, including the following 4:
1. Target marketing provides clarity and focus: it’s one thing to say you’re going on vacation—it’s quite another to say you’re going to Aruba for 5 days and 4 nights and staying in a 4-star hotel. When you clearly identify the market segment you’re targeting, it’s easier to establish realistic, measurable goals, to craft a sound marketing plan and to know which products to showcase. Said differently, target marketing lets you know, specifically, what your goals are and how to achieve them.
2. Target marketing simplifies new customer acquisition: finding new customers for your small business can be expensive. In fact, according to Forbes, it costs about 5X more to acquire a new customer than to retain an existing one. That doesn’t mean you shouldn’t try to find new business—it means you need to find more cost-effective strategies to achieve that goal. Because target marketing provides a clear road map for who your ideal customers are and how they shop, it lowers marketing costs making new customer acquisition easier.
3. Target marketing saves you time: the last thing your small business needs is another “wild goose chase,” another campaign that targets customers who have little or no interest in your products and services. Having a nuanced understanding of your target market (one grounded in accurate demographic and psychographic data), you won’t waste time going after the wrong prospects. For example, if you’ve effectively defined your target market and leverage Google Ads, you’ll save time by including only keywords that align with the market segment you’re targeting.
4. Target marketing benefits from the “80/20” rule: simply stated, the 80/20 rule teaches us that about 80% of the marketing results you achieve come from just 20% of the marketing activities you undertake. It also states that about 80% of your company’s net revenues come from just 20% of your customers—the ones who in other words buy more often and make more expensive purchases. When you practice target marketing, you’ll have the data you need to identify your top prospects, leads and customers, boosting your business’s productivity and profitability.
What Are The Best Ways To Identify Your Target Market?
Most businesses, including small, local ones, will have more than one target market. Because you offer a wide range of products and services, you’ll also have a variety of buyer personas and market segments, each of which might be characterized as its own “target market.”
That said, whether you have one target market or 20, the process for identifying it (or them) will be similar, typically involving the following 4 steps:
1. Define your current customers: unless you’re planning to substantially change the nature of your business, odds are new customers will look a lot like your existing customers. That means you need to clearly define who your current customers are. What are their favorite products? How do they like you to communicate with them? What marketing channels do they prefer (for example, email marketing and social media sites)? Do they prefer a professional voice or one that’s more casual and humorous? The answers to these questions will inform the marketing approaches you take to acquire new customers.
2. Identify your chief competitors: chances are there are local businesses who share some or all of your target market. You need to look (objectively) at what things you do better than they do, and those areas where they outshine your business. What products do you both offer, and who offers those products for less money? How is their customer service compared to yours? What marketing channels are they leveraging, and how successful are those approaches for them? By defining the nature of your competition, you’ll go a long way to refining your notion of what your target market is.
3. Define your products’ features and benefits: a product feature is what that product does; a product benefit is how specifically it helps your customers. In understanding not only the utility of your products, but also the way those products solve problems for your customers, you’ll gain a more granular understanding of who they are and how they relate to your business.
4. Identify likely buyers: it’s not enough to know which prospective customers might need one of your products—you also need to know who within that group are the most likely buyers. For example, a large group of prospects might need a new washing machine, but within that group is a smaller market segment that matches the demographic and psychographic characteristics of customers who’ve purchased one of your washing machines. Among the demographic traits you should examine are age, location, gender and income level. You should also look at psychographic characteristics like values, beliefs, interests and shopping behavior.
A sound marketing plan can spell the difference between success and failure for your small business. A key element of that plan is a highly granular, actionable and data-driven understanding of your target market—who they are, what they need, and the ways in which your business can help them solve their problems.
Of course, accurately defining your target market—and creating the kind of messaging that resonates with them—can be both complicated and confusing. Fortunately, there are affordable digital marketing agencies right in your community with the deep marketing knowledge to help ensure your success. To learn more about the ways our website optimization, local SEO, strategy and consulting services can be game changers for your business, schedule a call with us today.