Before you can begin marketing to your prospective customers, you first have to know who they are. Are they old or are they young? Do they live in the city or in the suburbs? Do they care more about price or about quality? If you sell to businesses, are they big companies or small? What industries are they in? How quickly do they make their buying decisions?

This information may not immediately seem important, especially when you first launch an entrepreneurial venture. After all, you need every customer you can find. But narrowing in on exactly the type of customers you’d most like to reach—and the kind that are most likely to be willing, eager, and able to buy from you—is a key building block to success in marketing. Defining your target market gives focus to all your marketing and sales activities, helps you craft your advertising messages (and images) and choose where and when to advertise, influences which distribution channels you use, and perhaps even helps you decide on the color of your employees’ uniforms or the type of music playing in your store.

It’s critical to clearly, and early, define your customers, because many of the other decisions you make about your business will follow from knowing who they are. If you don’t know who your customers are—their age, location, interests, spending habits, income level, and the like—you won’t know how to tell them about your product or service or how to get it to them. You could waste money placing ads on the wrong websites, sending direct mail to the wrong people, or participating in the wrong social media. Without knowing who your customers are, you could easily misjudge the price your customers are willing to pay. Know thy customers should be one of your business mantras from Day One. You must understand both who makes up your target market and the characteristics and motivations of that market.

Are customers really out there?

First, you need to figure out if potential customers actually exist. Companies have been built—and have failed—on the false premise that customers for a given product or service are, in fact, out there. You can assess whether your customer base actually exists in a number of ways.

The best way to know whether customers are out there is, paradoxically, if you have competition—if direct competitors already sell the same or similar product or service. The fact that real customers already pay real money for what you intend to sell provides the strongest indication that you’ll likely find a willing customer base. While the fact that competition exists often scares off novice entrepreneurs, the fact that you have healthy competition means customers are out there. Indeed, many investors in entrepreneurial companies like to see healthy competitors. Of course, if your competition is very strong and their customers extremely loyal, it may be difficult to attract these customers to your offerings. But, in general, the rule is that “it’s easier to get a piece of an existing market than to create a new market.”

Still, most entrepreneurs either introduce something new, improved, or different—or try to reach a new market. That means you need to attempt to determine whether you’ll find receptive customers.

Target markets and established businesses

Even if you’ve been in business for years, you still need to research your market. That’s because customers change and evolve. What was true about your customer base when you first built your business may no longer be accurate. What goes on with them now may differ from what originally motivated them to buy from you.

Learning more about your present customers can help you keep them. Your research may suggest that you need to modify your marketing activities—perhaps even your products and services. You’ll also learn how to bring in more new customers.

en·tre·pre·neur·ship key terms

Consumer or end user

The individual who will actually use the product or service and not necessarily the person or entity that purchases it.

Demographics

The description of a market by the most basic, objective aspects of the customer base. These specific, observable traits define a target market, such as age, income, gender, and occupation for consumers, or company size, revenue, and industry affiliation for business customers.

Market segmentation

The process of dividing a market into sections or “niches” that share something in common—either they behave in similar ways, or they have similar requirements. The goal of market segmentation is to tailor a product or service to appeal to each segment. This “tailoring” can include marketing, pricing, or distributing differently, or adding or deleting features.

Psychographics

Characteristics of a target market based on attitudes, values, lifestyle, desires, business style, and behavioral characteristics that may affect the buying decisions of customers.

Purchasing patterns

The typical buying habits of customers, such as number of times they purchase, interval between purchases, amount of product or service purchased, time required to make purchasing decision, where and how customers purchase product, and method of payment.

Target market

The people, businesses, and organizations most likely to buy a product or service; the people, businesses, and organizations a company tries to reach so these groups will purchase its goods or services.

To do so, you can start with basic market research—progressing through customer surveys, sampling, testing, or interviewing potential customers in focus groups (for more on research, see Chapter 3). These activities will tell you what actual members of your target customer base think about what you plan to offer. Or you can start testing in small markets to see the response to your offering. McDonald’s does this all the time: It offers new specialty sandwiches at a number of selected restaurants in a few locations, to gauge market reaction.

Notice the word attempt in the earlier paragraph. It’s important to understand that you may not be able to judge whether you have potential customers, based on traditional methods of market research. This especially applies if you offer a truly innovative product or service. The more innovative it is, the longer it will take for customers to become familiar with it, grow comfortable with it, and begin to buy it. It’s much easier to market ballpoint pens, for example, than to convince people to purchase a new device that allows them to input text into a computer without typing.

Add to that the fact that customers don’t always know what they want until they try it. Once, if you’d tried to sell bottled water to the mass market, they’d have laughed all the way to the kitchen tap. And almost certainly, if asked whether they would pay $70-plus a month to have a mobile phone, the vast majority of Americans would have answered with a resounding no. Even savvy businesspeople make mistakes of this kind. Every market test that 3M conducted of Post-it notes predicted failure—and now they’re indispensable. The newer something is, the longer it takes to catch on.

Who’s in the bull’s-eye?

When defining your target market, keep the image of an actual target in mind. The outermost ring of the target is the entire universe of potential customers—everyone who might ever possibly be interested in your product or service. As you get closer to the center of the target, narrow in on the customers who are more likely to actually make a purchase. The group at the center should be those whom you would most like to have as customers, whom you can reach and sell to affordably, and who are most likely to buy.

A target is something you aim at

We call it a target market for good reason—it defines exactly whom you aim to reach. The clearer the image of your target, the more likely you will hit it.

Let’s say you sell a new kind of energy bar. You know it would appeal to a whole range of people: health buffs, office workers who can’t get away for lunch, serious athletes, people who are sick and need more calories, harried moms who don’t have time to stop for a meal, and just about anyone else who could use a quick, healthy pick-me-up.

If you tried to sell to everyone who might buy your product, you’d need a huge marketing budget to make them all aware of you. You’d probably have to spend a fortune on advertising. And even then, you’d have to decide what you would say in your ads and what kinds of people and images you would feature.

Instead, you need to select one or two market segments to pursue, especially as a new company, with limited resources. But whom should you sell to? How do you target your market? You have to narrow in on the factors that best make you able to compete and to reach—and sell to—a specific type of customer. These are some of the factors you need to consider in closing in on the “bull’s-eye” in your target market:

■ The features and benefits of your product or service. Which group does your energy bar best suit?

■ The competition. Is there a segment of the market that other energy bar makers fail to reach, or underserve?

■ Market trends. Is part of the overall market for energy bars growing?

■ Most motivated buyers. Which part of the market has the most immediate need or desire to purchase energy bars?

■ Greatest ability to purchase. What type of customer most likely has the disposable income to spend on energy bars?

■ Ease of reaching your prospects. Is there a part of the market that’s easiest to tell about your energy bars, because of trade shows, media (such as magazines), or other communications directed specifically at them?

■ Ease of selling to your prospects. Do any existing distribution channels (such as specific stores, websites, or wholesalers) make it easier or less expensive for you to reach one part of your market?

In your case, let’s say you’ve developed your energy bar to have particular benefits for people engaged in sports. It happens that you’re located in a college town, filled with athletes on college teams: football, baseball, soccer, swimming, field hockey, and more. The town has even more recreational athletes: runners, swimmers, snowboarders, cyclists, skateboarders, and hikers.

Your research reveals that you can most easily and quickly reach athletes on college teams. After all, if you can only convince the coaches of each team that your energy bar can improve their players’ performances—perhaps even giving each team samples to introduce them to your products—you may be able to get their teams to make large, repeated purchases. If they like your energy bars, the star players may endorse them when you start to market to recreational athletes. And you may be able to get other college (and high school and professional) teams all over the country to buy your energy bars, too. (That’s basically how Gatorade launched in 1965. It was promoted as an energy drink for athletes, and it now serves a much broader market.)

Are you a B2C or B2B?

One key component of your company’s business model—the basic structure of how you will make money—is whether you will sell “B2B” or “B2C.”

■ B2C (BUSINESS TO CONSUMER): You sell a product or service directly to the consumer or end user.

■ B2B (BUSINESS TO BUSINESS): You sell a product or service to another business, either for the company’s own use or for that company to resell to customers.

In your marketing, you will want to emphasize different features, depending on whether yours is a B2C or a B2B business. With a B2C business, you’ll focus entirely on the personal benefits the end user will get from purchasing the product or service. With a B2C business, you’ll also have to emphasize the broader benefits the company will reap, especially when it resells your products or services to others. The focus will include how you meet a business need, such as through increased efficiency or improved profits.

End user vs. actual customer

If you were asked to say precisely who your customers, or potential customers, are, how would you answer? You might say that your customers are all the people who purchase and use your product or service—but you’d be wrong. You must carefully distinguish between your customer and the consumer or end user of your product or service. You may sell directly to your end users. Or you may sell to an intermediary—and that intermediary may well have other intermediaries.

Let’s continue with the energy bar example. Who’s your customer? Is it a coach purchasing the energy bars for an entire team? They’ll want to know not only whether it will improve performance but how much bulk purchases will cost. Or is it the end user (the consumer) of your product—the college athlete—who will actually eat it and get the burst of energy needed to score that winning goal? They’ll be interested in the taste, as well as how it makes them feel.

Or is your customer the snack foods buyer at the grocery store? This person’s concerns are down to earth: how much money you’ll spend on advertising, how quickly you’ll replenish inventory, and whether you’ll pay the store a stocking fee to obtain shelf space.

Recreational athletes and other consumers won’t have a chance to buy or eat your energy bars if you don’t meet the supermarket buyers’ needs first. On top of that, if you don’t have your own sales and distribution force to sell to snack shops and supermarkets, it’s likely you’ll first have to find a distributor and convince them to carry your product.

The coach. The athlete. The store buyer. The distributor. You have to satisfy a lot of customers with each energy bar. You’ll give yourself a competitive edge by thinking of each of these customers—and planning for their needs and motivation.

Being responsive to the details that are important to distributors, retailers, sales representatives, and others helps you plan your marketing materials, operations, packaging—and even the nature of the product itself. If sales reps in your industry must purchase their samples, for instance, you can set yourself apart by supplying free samples. If retailers can fit more square packages on a shelf than round packages, you’ll be more competitive by choosing a square package.

Even if you think you’ll market directly to consumers on the Internet, you’ll discover that there are still many entities between you and your customer in cyberspace. In the case of the energy bars, your intermediary might be the online grocery store, a health food site, a sporting goods store, a gym, or a search engine that will help customers find you. So you’ll still have more than simply athletes to please.

Primary and secondary customers

Your primary customers are the ones you spend the most time (and money) targeting. For example, if you manufacture outdoor apparel, your primary customer could be a snowboarding or surfing enthusiast. Yet you might also have secondary customers—customers you wouldn’t necessarily expect to be interested in your product.

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