A target market is a particular group of consumers at which a product or service is aimed. In the early stages of a startup, defining this group is perhaps the most critical strategic decision a founder will make.
Many entrepreneurs fall into the trap of believing their product is for everyone. While that might be true in a theoretical future where you have dominated the globe, it is rarely true on day one. Attempting to sell to everyone usually results in selling to no one.
Your target market represents the people who are most likely to convert into customers because your solution directly addresses their specific pain points. They are the people who need what you are building right now.
Breaking Down the Components
#Identifying a target market requires looking at two distinct categories of data.
First, there are demographics. These are the quantifiable statistics of a group. This includes data points such as:
- Age
- Location
- Income level
- Education
- Occupation
Second, and often more important for startups, are psychographics. These attributes classify people based on psychological variables. This includes:
- Values and beliefs
- Interests and hobbies
- Lifestyle choices
- Spending habits
- Specific pain points or frustrations
For a new business, the psychographic profile usually holds more weight. You are looking for people who share a specific problem rather than just people who share a specific age.
Target Market vs Target Audience
#It is common to hear these terms used interchangeably, but there is a distinct difference worth noting for operational clarity.
The target market is the broad group of consumers defined by the product strategy. It is the who in your business plan.
The target audience is the specific segment of that market you are trying to reach with a specific marketing message or campaign. It is the who in your advertising strategy.
For example, your target market might be small business owners in the United States. Your target audience for a specific week might be small business owners in Chicago who use Instagram.
The Necessity of Constraints
#Startups operate under constraints. You have limited capital, limited time, and limited manpower. Focusing on a specific target market is an exercise in resource allocation.
When you narrow your focus, you can tailor your product development to suit a very specific set of needs. This allows you to build a better product for a smaller group of people, rather than a mediocre product for a large group.
This also streamlines your messaging. It is easier to write copy that resonates when you know exactly who is reading it. You can speak their language and address their specific anxieties.
The Hypothesis Approach
#It is important to approach your target market definition scientifically. At the beginning, your defined market is just a hypothesis.
You are guessing that this specific group of people will want your product. You do not know for sure until you look at the data.
Founders must be willing to ask hard questions. Is this market large enough to sustain the business? Do these customers actually have the budget to pay? Is the market growing or shrinking?
If the data comes back negative, you must be willing to adjust your definition. The goal is to find product-market fit, and that often requires adjusting the market variable until it aligns with the product.