What’s your target market? It’s a pretty crucial question to be able to answer. If you know the answer, great. If you don’t know the answer, you need to. But, on the flip side if you do have an answer there is a right answer and a wrong answer. Having asked that question a lot, I get a mixed bag of answers. One of the most common responses I receive is ‘we target small and medium-sized businesses.’ Well, congratulations you’re currently targeting 5.4 million UK businesses. It might be worth starting with a decent definition for ‘target market.’
‘A target market is a group of customers within the serviceable available market that a business has decided to aim its marketing efforts towards.’
Wikipedia
Now in many cases, I think people get confused between the following:
- Total Addressable Market (TAM) – all of the companies you COULD serve in the universe.
- Served Available Market (SAM) – the companies I can reach through my existing sales channels.
- Target Market (TM) – companies who will be most likely to buy.
SMBs could most definitely be part of your Total Addressable Market. But defining organizations by their demographics is only the start, and those demographics are rarely the reason why someone would ever buy your product. In some cases, it may just be that someone’s demographic attributes are directly connected to the thing or service they wish to purchase. But, failure to recognize this can spell disaster for your marketing efforts and budget.
Finding your ownable market niche and target market
If you’ve got one, great, in fact, congratulations. If you haven’t, find one. Sounds simple, doesn’t it? It’s a lot simpler than most people believe. If you can’t find a market niche you can create one or in the words of King James Bible, ‘Act as ye have faith and faith will be given’ or in the word’s of Leo McGarry from the West Wing, ‘Fake it ’til you make it.’ But once you’ve defined it – test it – keep the definition evolving.
Trust me its easier to grow and target your marketing spend when you have an overly specific and often odd sounding definition of your target market. Even if the resulting company count is small. A small pond to fish is excellent. You can get to know everybody; you understand the terrain, the hotspots, the things to do and the things not to do. Most of all you can own that space. At the risk of mixing metaphors, you can be a big fish in the small pond that you’ve defined. Once you’ve dominated this pond, you can grow legs and crawl to the next adjacent pond. Okay, I’ve overstretched the metaphor now.
How do I define my niche you might ask. Well, let’s start to think about the things available to us.
So there is undoubtedly the traditional demographics:
- Size: SMB, Mid-Size, Enterprise, MNC
- Location: Continent, Country, State, County, City
- Vertical Market: legal, software, retail, etc.
- Revenue
- Employees: 10, 100, 1000, 5000
- SIC – yawn.
But then there is situational:
- Ownership structure and funding model: Private, Public, VC, PE, bootstrapped
- Are they profitable yet or not?
- Who do they serve? B2B, B2C, Public Sector
- Situational: Consolidation, Growth, Hyper Growth, Decline, Acquisition, Merger.
Being more specific about size, their stage of life, how they are structured, what markets they serve are all perfectly viable ways of creating your very own niche; a niche that is free, available and ownable.
Getting to the target market data points that matter
It may be the case that you see that the first people who buy your product are of a specific demographic. CFOs for SMBs in the Greater London with 10-25 employees. But that isn’t the real reason. More importantly, there are other reasons you need to uncover. What are the reasons they made the purchasing decision? Was it a new CFO who made the decision, was it a particular time of the year, are they in similar vertical markets? People buy your product to solve a problem; they don’t buy it because of a demographic.
Speak to these people unearth the desire and requirements that led them to their buying decision. It might not be what your sales guys say by the way (I’ll place my money on the fact that it won’t be a deal won based on a relationship) there will be a more credible business reason.
So, if you take a few thing away from this article start with getting scientifically creative about your target market. Don’t mix up your target market with your total addressable market. Look beyond the data and understand their situation, not just their demographic profile.