After a busy January with all kinds of final exams and presentations, I am excited to dive into my independent research project again and kick off this new semester right away. Over the course of last semester, I explored topics related with entrepreneurship such as innovation, mission statement, operation strategies, etc. And this semester I will keep exploring different components of a successful entrepreneurship experience such as marketing, competition and management. While I am keeping myself busy with the study of entrepreneurship, I will also continue running and expanding my own sneaker re-sell business. Once a while I will provide analysis of the updated news of the current sneaker market. It has been a fruitful journey, and I look forward to my development in the world of both entrepreneurship and sneakers in 2016.
And I don’t want to waste any time before starting off my first topic – the importance of a correct target market for a business, especially a startup. As the title goes, successful entrepreneurs are often talented snipers while it comes to the identification of a strong target market. They analyze the market and choose the correct target market in an efficient way, which creates a solid basis for their business. Today we are going to explore two basic questions: what is a correct target market? And why is it so important for the development of a business?
Many people who are interested in entrepreneurship claim that they know the concept of a target market well, but in the end, what is a target market? Does it only refer to a specific market a business should address, or it actually means more than that? According to Entrepreneur Encyclopedia, a target market refers to “a specific group of consumers at which a company aims its products and services.” I, personally, highlight two words from this seemingly simple definition: “specific” and “aims.” “Specific” demonstrates that a target market should be detailed and pinpointed. It cannot be something too broad such as the whole male population of the United States, or all teenagers around the world (well, there are exceptions, but only very very few). The word “specific” not only points out a crucial concept regarding target market, but also limits the size of it. The word “aims” is pretty straightforward – the company should work to provide the best products and services for its specific customers. In the several blog posts I wrote on the topic of mission statement, I addressed how important a correct mission can be for a business. And here, “aims” demonstrates that a correct mission should address a correct target market. However, the world “aims” leaves plenty of space for unlimited opportunities – while a company is working to provide products and services for its specific target market, its products and services may also influence and attract others outside the target market, and that’s 100% acceptable! A correct target market refers to a group of people that a business is good at serving, and as entrepreneurs, we have know how to hit the “right spot” of the market so that our businesses are addressing correct customers.
But how should we “specify” target markets? If our business is working to serve people, how should we divide the whole population so that we can choose the right group of people? The graph above is just one explanation, out of the many ways to put the whole population into many small sections. Besides sex, age, marital status, etc. that are shown above, family size, education, ethnicity, social class, nationality, etc. can also be considered as standards to differentiate the whole large population. For example, Disney’s target market is “boys and girls who are 4 to 12 years old and families with kids.” Besides the physical segmentation we have just explored, we can also use psychological segmentation to identify specific target groups. For example, people can be put into different groups according to their attitudes, interests, opinions, and values. Uber targets those people who prefer private transportation rather than public transportation, and that’s a good example of psychological segmentation. Again, there are many different ways to segment the general population, and there are no rules regarding how you, as a creative entrepreneur, should do it. But remember one thing – be SPECIFIC!
So why is a correct target market crucial to the development of a business? The reasons are straightforward but also multi-layered. Most significantly, to target who you are going after will make you know how to reach to them more easily. By contrast, “if you try to blanket everyone with the same marketing message you will lose over half of your audience simply because it doesn’t apply to them.” According to Michael Kaleikini, the chief editor of Entrepreneurship Encyclopedia, having no targets while running a business is like “shooting for the moon if you miss, you’ll land among the stars.” Therefore in order to make your business more efficient, you need to have a clear target market. Moreover, a correct target market can set a solid base for the business, especially for startups, because the startups usually don’t have too much financial power. A specific and correct target market can help the startup quickly locate its position within the competitive market, and with such a solid base, the company can keep expanding its target market while making improvements.
That wraps up my blog post this week. Next week I will explore the topic of how to choose the correct target market through research and case analysis. I will also talk about my own business and how I should identify a certain target market. Stay tuned!