The National Retail Federation (NRF) reported good news this week. Black Friday sales were a success, and the NRF expects holiday sales to increase by 4.1% for 2012. This is of particular interest for small businesses in the U.S., which comprise over 25 million of the nations commercial outlets and employ nealry half of the American workforce. Given that independent ventures and entrepreneurs are often venerated as the backbone of the economy, it is important that they are able to capitalize on increased consumer spending.
According the Legatum Institute, however, there is reason to believe that U.S. businesses may not be maximizing their full potential. The organizations annual report on world prosperity revealed that America had dropped out of the top 10 rankings for the first time since its inception, while neighbors Canada were left soaring high in sixth position. Although entrepreneurship and opportunity accounts for only a small section of the overall report, it is fair to surmise that U.S. firms are struggling to drive the economy's growth.
The Importance of Determining a Target Market
Given this failure and the state of the current economy, it is crucial that businesses strive to afford themselves every possible market advantage. This is especially important for independent ventures, which face a difficult challenge to compete with large corporations and well-resourced companies. One of the ways in which small businesses can optimize their performance is to determine a well-defined target market, as this enables them to focus their efforts and achieve a high rate of sales conversions.
Entrepreneurs and small business owners often resist the need to define a core target market in the mistaken belief that this will limit their sales prospects. This is a huge misconception, however, as by marketing your product to a general and poorly-defined audience you are likely to waste valuable money and dilute your fundamental business message. If you consider marketing as a financial investment, then developing a targeted marketing strategy will allow you to achieve the best possible return over time.
How to Determine a Core Target Market
With this in mind, the challenge facing small businesses owners is how to determine a viable target market for their venture. If this matter is not addressed, then even the most innovative of concepts can be rendered redundant without ever seeing the light of the consumer market.
Consider Who is Likely to Purchase Your Product
Once you have a viable and functional product, it is crucial that you consider the demographic most likely to purchase it. This can be determined by gathering information from a range of online and trade resources, although it is wise to understand your target consumers' fundamental characteristics before creating a more detailed profile. Consider the age, gender and annual income of your potential consumers as a starting point while also paying attention to their marital status and employment circumstances. This will afford you a basic understanding of your potential target market and its typical spending habits.
Evaluate Your Consumers' Values and Lifestyle Characteristics
Once you have identified a consumer demographic and its earning potential, the next step is to comprehend how and why your customers spend their hard earned money. This will require you to undertake more detailed research, while paying particular attention to your targeted customers' activities, interestes and opinions (AIO). As the explosion of the organic food and produce market proves, consumers are increasingly influenced by their social values and a desire to effect change. So should your target market boast strong environmental values, for example. Then you will need to tailor the packaging and material of your product to suit this burgeoning demand. This is often referred to as psychographic profiling, and it helps small business owners to garner a detailed picture of their ideal consumer.
Interact with Your Customers Through a Targeted Marketing Strategy
Armed with a clear comprehension of your target consumer and its motivation, the final step is to effectively interact with them through a defined marketing strategy. It is not enough simply adopt a broad use of social media, for example, as research suggests that up to 70% of Facebook users who 'like' a page would not qualify as part of that brand's target demographic. Given this, it is important to monitor your consumer's social media usage and ascertain the individual sites that they frequent, before looking to engage them through real time interaction and emotive conversations.
The Bottom Line
If you have or are thinking of starting a small business, in order to thrive in the current economic climate, it is crucial to determine a well-defined target market. While it may be extremely tempting to market a product towards a broad and diverse audience, this is often a futile practice that wastes time and money without ever appealing to a specific consumer demographic.