How To Perform A Target Market Analysis For Startups

Having in-depth knowledge about your target customers is the only way to serve them properly. Even if you know who your ideal customer is, success will require you to know where they are, how to reach them, what challenges they face, and more. The better you understand your client, the more effectively you will be able to serve them. The first and most important step to learning about your customers is performing a target market analysis.

In this post, we’re going to explain exactly what a target market is, how to perform a thorough analysis of your target market, and how to use that analysis to implement a better business strategy.

What Is A Target Market?

According to Investopedia, a target market refers to a group of potential customers to whom a company wants to sell its products and services.

No business serves everyone. When your specific customer groups are clear, it becomes much easier to develop an effective and accurate business plan. A target market is a specific group of potential customers who share similar qualities such as demographics, psychographics, income, location, and more.

Understanding your target market is critical – and not only because of its associated benefits. Companies who fail to understand their target market waste money on ineffective marketing strategies, and struggle to attract new customers.  

There are five things you truly want to understand regarding your target market:

1. Who Your Customer Is: How old are they? Where do they live? What do they do for a living? Are they married? Do they have children? What is their education level? Are they homeowners?
2. What Your Customer Needs: What are their interests? What do they value? Do you know what they like and dislike? What challenges do they face? What struggles do they have?
3. When They Are Likely To Buy: When do they seek a solution to their challenge? Do they purchase in a particular season? When is the best time to approach them with your offer?
4. Where They Can Be Reached: Where do they find out about new products? Where do they search for solutions? What places do they turn for advice and insight into their particular challenge?
5. Why They Will Buy From You: Why aren’t their problems being solved currently? Why haven’t competitors been able to provide a solution? Is there a specific reason why will they choose you? Why would they pay you, specifically, for your product or service?

How to Perform a Target Market Analysis

Before writing a business plan, you must understand your target market. The key to understanding your market is to perform an in-depth target market analysis. A proper market assessment includes segmenting the market into niche consumer groups and understanding the needs and desires of each of those groups.

There are several ways to identify and analyze your specific target market. Use these methods together to learn more about your customers, their challenges, and your potential to serve them.

Gather Secondary Research

The easiest way to identify and learn more about your target market is to tap into existing research. A quick Google search may bring up several studies of your market or surveys of consumers within that market.

Research to find what challenges each type of customer deals with. Does your product or service solve their challenge?

Through this research, you may find that a problem you thought existed for a specific consumer group isn’t really a problem for them at all. Or you may find that while there is a problem, only very few individuals within the target market actually suffer from that problem. Hopefully, you will find that there is a huge existing challenge and that your product/service is the perfect solution.

Secondary data can be tricky. Don’t just pull the first stat that you see, but make sure that you’re pulling the right information from the right sources. Here are some tips for gathering proper secondary research:

• Make sure that you are gathering data from reputable sources – research centers, large corporations who invest heavily in R&D, government organizations, and etc.
• Check the details of the study – Make sure the sample size is large enough and that the individuals used in the sample truly represent your target market.
• Look for recent and up-to-date studies – The market changes rapidly. For example, the way individuals felt about mobile dating five years ago may be completely different than how they feel about it today. Make sure your secondary research represents the consumer of today. Aleska, who runs a store selling cremation urns performed research to understand the market better. Studies showed that Western countries in the last decade have increased cremation rates. A simple shift in the marketing message allowed him to grow his business without increasing marketing activities or budgets.

Use the 5Ws to make your research most effective. Consider the following questions:

1. Who is being affected by a specific challenge?
2. What are their complaints and what are they currently doing about it?
3. When do they experience the problem and when do they seek a solution?
4. Where do they reside and where do they search answers to their challenges?
5. Why is this the right market to address with your product or service and why should they choose you?

Analyze Competitors

Performing a competitive analysis is a great way to learn more about your customers and the overall landscape of the industry. In some cases, analyzing competitors may introduce you to new target markets that you didn’t originally intend to serve.

Conduct a deep analysis of your competitors. Analyze their social media pages to see what type of consumers interact with their content. Inspect their websites to see what customer markets they target their sales copy towards. If they have a blog, examine it and determine what type of customer they are writing their content for.

Explore their feedback and reviews to determine what qualities consumers enjoy about their products/services, and which qualities they don’t. Read what customers say about your competitors and determine how successful each of them is in serving your target market.

Use the 5Ws to make your competitive analysis more effective. Consider the following questions:

1. Who is currently serving the target market and who has the largest share of consumers?
2. What are they doing to reach consumers and what solution are they offering?
3. When did they launch and how established are they within the market?
4. Where do they operate and where do they market their services to customers?
5. Why can your company serve the target market better than these competitors?

Perform Primary Research

The best type of research you can gather for your analysis is primary research. This includes data that you gather on your own by interacting with real consumers within your target market.

Conducting primary research means getting off of Google and actually finding where your customers are. Then, speak with them and learn about their true desires. Here are several ways you can perform effective primary research to strengthen your market analysis:

• Forums: Online forums and social media groups are a great way to find pre-established communities of individuals with similar interests or qualities. On these platforms, individuals within the market often congregate together to discuss the challenges they face.
• Meetups: People also form groups offline through meetups. For example, a company offering a product to web developers can easily find a group of developers in any major city, since developer meet-ups are extremely common. These events are great for networking, meeting potential customers, and generating first-hand customer feedback.
• Surveys & Interviews: Once you’ve located consumers from your target market, collect the data you need through surveys and interviews. Ask them about the issues that they face, how they solve their problems, and how you could help them solve their problem better. Face-to-face interviews are often the best way to get real-time feedback from potential customers.
• Market Tests: An effective way to learn about your market is to perform market tests. Use landing pages to showcase your solution and use ads to send targeted traffic to the page. Test to see how these potential customers respond. You can even build a pre-registration form for the page to test how many of these individuals convert from visitor to interested buyer. Tracking metrics from these market tests are an excellent way to prove your concept and raise initial app funding.

Using Your Analysis to Define Strategy

The entire point of conducting a target market analysis is to convert the results into an effective strategy that can lead to tangible business gains. When you write an app business plan, the target market analysis is core to the entire strategy.

For a new startup, the objective may be to learn more about their audience so that they can better strategize their launch marketing efforts. An established business, however, may seek to identify new market gaps that the business and its competitors have not yet addressed.

Once you have performed a target market analysis, there are several things that you can do to convert your results into a strategic plan.

1) Create Customer Profiles

A customer profile takes all the information that you have gathered about a specific customer type and transforms that information into a “real” customer.

In other words – if you had an ideal customer, who exactly would they be?

Give them a name and a personality. Describe their background, the challenges they face, and the qualities that they seek in a valid solution. In other words, bring them to life.

Example – MADE App

Let’s say you are a mobile on-demand Make-Up Artist app called MADE that targets late-nighters in high-profile cities like New York. Here is an example of a customer profile you might add to your business plan.

2) Identify New Problems

Companies are able to gain a major competitive advantage when they can identify problems and issues that no other competitors have addressed. For startups, identifying these problems can lead to new product developments and can give the brand a first-mover advantage.

Consider observing your ideal customer for a day. If your target market consists of plumbers in Detroit, for example, do a ride-along with a plumber to see what challenges they face throughout the day. Identify things that bottleneck their processes, or struggles that they seem to face often. Sometimes, people can’t explain the problems that they deal with on a daily basis. However, if you observe them long enough, you will begin noticing specific patterns of challenges that they deal with frequently.  

3) Establish New Marketing Channels

Mass marketing is the least effective and most wasteful type of marketing strategy. The best way to maximize your marketing budget is to market directly towards the consumers that are most likely to purchase your product. The more you know about your customer, the easier it will be for you to reach them.

Find out where your consumers are, what influencers they pay attention to, what books they read, and who they follow online.

Identify their customer process as they make their way down the purchase funnel. What types of questions do they ask when they are first being introduced to a solution? What questions do they ask when they are seeking to make a purchase?

As you learn the answers to these questions, you will be able to implement better marketing strategies. Instead of blindly marketing to everyone, you will know exactly where your target customers are and how they prefer to be introduced to new products and services.

Sometimes, startups are able to better understand and engage with the market than larger brands can. A proper target market analysis can give you the edge you need to level the playing field with more established competitors.

An Ongoing Analysis

Unfortunately, you’re never really finished with a target market analysis. Markets don’t stay the same forever. The needs of customers change. The competitive landscape frequently loses and gains players. The point is, you should perform a target market analysis on a consistent basis to always stay updated on who your market is and what solutions they require.

Our business plan consultants perform target market analyses on a daily basis. Need help identifying your customer markets for your business plan? We’d love to help. Contact us today to speak with one of our startup experts.