The absolute number one mistake (small) business owners make is not defining their target market well enough. I see it over and over again. You ask a business owner who they are targeting and they will answer small businesses or people who want to be healthier. Have you ever counted how many small businesses there are? And do you know anyone who doesn’t want to be healthier? Conclusion, these descriptions are way too broad to be useful. Let’s illustrate with some examples.
Say you have a food supplement Webshop located in The Netherlands and you target people who want to be healthier. That is pretty much everyone so if you wanted to reach them all and wanted to take out an ad for instance, you would have to go to the biggest newspaper in the country in order to reach them all. Or have a commercial made and buy airtime on the TV channels. In order to reach the masses you have to take to using mass media. If you are a small business owner, you do not have the budget for that.
You have to have a more targeted approach and select one or more market segments you want to single out. Say in the case of the Webshop selling food supplements you can assume they are targeting consumers. From that you can go through a number of steps to take a more focuses approach.
Group consumers with similar problems together
As an entrepreneur you are in the business of solving your customers’ problems. You provide them with a solution that they need. In the case of the food supplements there literally are a lot of problems you could help your customers with; energy levels, brittle bones, depressed moods, an extra everyday boost, you name it.
Define those groups that have identical problems and needs. In the case of food supplements you may have quite a lot so you may have to make a selection before going to the next step, but you catch my drift.
Attach characteristics to each group
Then for each segment determine if you can attach certain characteristics to that group. You can look at demographic characteristics (old, young, family with children or retired people, how much money they make etcetera.). You can look at geographical characteristics (do people from urban areas use more food supplements, or people from areas that are closer to nature?). You can look at psychographic characteristics like lifestyle or personality. Or you can check for behavioral characteristics. Or you can combine from the groups of characteristics.
I made a cheat sheet with all these segmentation criteria. (Beats having to Google it and getting a lot of poor results. I know that because I tried it.) You can download it here. If you want more tips and tricks be sure to subscribe to my newsletter by clicking on the image below.
Compare the groups to your yardstick of attractiveness
You as a business owner have to decide what you think is attractive in a segment. Compare the groups you came up with, with your own criteria as well as your business objectives and resources. If they do not match eliminate them.
Lastly estimate the profitability of a segment
There is a formula for this in which you multiply the number of customers by the average sale per customer and multiply that again by the number of sales per customer per year. From that sum (the revenue) you subtract the cost.
This of course is really hard to do as you as a small business owner really do not have access to all kinds of predication models, so I would just look at factors like income and social class. Being small also has the benefit of being flexible, so you can always take a trial and error approach to this.
Once you have found who your target customer is, you can go out and connect with that customer. That in itself is another marketing task you better think about and plan, because know who your customer is and then not reaching out to them properly is another mistake you want to avoid.
In a future blog I will talk about finding your B2B customer.
As a DIY Marketing Mentor I help small businesses find their customers and reach them so they can grow their customer base and their business. It may be something for your business. Check it out and contact me through the form below if you have any questions.
By Pepita Bos