Even with a good product, defining your target market remains to be a critically important process that can make or break business success. Good business thrives on a clear product-market scope, which is a well-thought product serving a well-defined target market. Your target market represents the people having a similar need, possessing the money to spend, and demonstrating the willingness to buy your product.
The following presents a 5-step process that will enable you to identify correctly your target market and ensure that your product-market scope is consistently beamed toward successful marketing:
1. Establish clear and precise product profile.
To identify precisely your target market, you must first know what you will sell so that you can best focus the values you wish to offer. As a matter of good target marketing practice, always starts with the completion of a product profile statement that clearly describes the needs and wants your product aims to satisfy, the functions, features, and benefits it seeks to offer, the unique advantage it promises to deliver, and the major reasons why you have chosen the particular business.
Your product profile statement embodies the fundamental basis, or the compelling value proposition, of the business. It presents the core objective of your product, whether it is to satisfy people’s basic needs, solve their problems, or make them feel good. The statement will later help you determine which group of people will generally need and buy your product.
2. Identify potential markets through segmentation.
Once you are totally clear on the values of your product, you then go into market segmentation, the process of breaking your total market into smaller sections. Market segmentation enables you to pinpoint which segment can give you growth, profitability, and market share without spreading yourself too thinly across broad and non-productive market coverage. In its manageable context, you can adopt the following market segmentation strategy:
a. Classify the market for your product – it is either “Consumer” or “Industrial.
b. If your product caters to a Consumer Market, you can use the following segmentation parameters: geographic (e.g. regions, states, counties, or cities), demographic (e.g. age, sex, marital status, income, work, education, family, religion, or race), psychographic (e.g. social status, lifestyle type, or personal attributes), and behavioral (e.g. frequency of use, brand loyalty, or buying habits).
c. If your product serves the Industrial Market, you can consider segmenting the market by industry type (e.g. services, trading, manufacturing, or retailing), institution type (e.g. private, government, or both), customer type (e.g. final or intermediary), organization type (e.g. head office, branch, or agency), mode of purchase (e.g. cash, installment, or subscription), and company size (e.g. small, medium, or large).
To illustrate, let us assume that you are a small service business offering EMR solution (clinical software) on a “Full EMR” or “EMR Only” system sales basis. You serve healthcare practitioners in medical offices and hospitals, both solo providers and those operating in partnership with one or more providers in a medical office. Your product has similar application across outpatient and emergency hospital units. You consider serving healthcare practitioners from California, Hawaii, and Nevada. As a strategy, you have decided to adopt a low-end price positioning of $4,600 in an industry price range of $5,000 – $12,000 per EMR system. Based on industrial market parameters, you can segment your EMR market / prospects through any or all of the following classification modes:
By Customer Type: Doctor’s offices, outpatient units, and emergency departments
By System Requirement: Full EMR (w/ practice management) and EMR only clients
By Institution Type: Private, Government, and Non-Profit EMR users
By EMR Utilization: W/ EMR System, W/o EMR System, and W/ Pending EMR order
By Purchase Type: Cash, Installment, and Lease EMR clients
By Price Category: Low-priced, Medium-priced, and High-priced EMR system buyers
By Practice Level: Solo provider, First provider, and Shared provider (succeeding)
By Size of Clinics: Small (5 doctors), Medium (10 doctors), and Large (15+ doctors)
By Area Priority: California, Hawaii, and Nevada markets
To implement a responsive segmentation model, never forget that your market segments must be measurable that they can be identified, large enough in size that the cost of targeting them can be justified, accessible that they can be reached through communication and distribution networks, distinct that they yield unique responses to different marketing stimuli, and stable that they can prevent unnecessary and costly changes.
3. Research for additional information on target market.
Apart from information derived from your market segmentation, you need to research for additional indications about your target market such as those relating to: profile of EMR decision-makers, methods of EMR purchase and payment, system preferences of customers, Website access habits and preferences of EMR users, usual mode of EMR delivery, customer EMR tutorial needs, preferred EMR-related publications, and software customization requirements. This additional information will help in defining your target market with high degree of particularity and clarity.
4. Develop your target market profile.
This is the stage where you need to pinpoint your key prospects — the target market you must focus on, pour in your best resources, and deliver outstanding value in the way your clients want it. It is the market segment where you can reign supreme over your competitors because of some key competitive advantage, either in terms of cost leadership, differentiation, or focus.
Pursuant to our example and based on the factors surrounding your EMR business, your target market profile could be clearly and succinctly stated as follows:
“Our target market consists of California-based small to medium, private and government-owned, multi-practitioner doctor’s offices, still without EMR systems but with demonstrable need either for full EMR or EMR Only systems, and with the financial capacity for upfront payment of $5,000 per provider.”
5. Validate the size of your target market.
With a clear target market profile, your last step is to estimate the size of your target market. The idea here is to determine if there are enough prospective customers in your chosen market to support a viable business. Note that your addressable market must yield revenues sufficient to sustain a successful business in the long-term. Once convinced of the foreseeable business potential, start strategizing on how to reach and capture your target market. Otherwise, there is no point pursuing and dominating a market that does not offer predictable results for profit, growth, and market share.
In a nutshell, if you can correctly define your target market, you can enhance your knowledge of and satisfy customer’s needs, wants, and values, run more effective marketing and communication programs, deal with customers that can give you the desired volume of business, create sources of differentiation, and develop internal strength to meet strategic opportunities.
