How to Identify the Target Market of Your Startup
Not everyone wants to buy what you’re selling. For your startup company to be successful, you need to identify your target market. This is one of the first steps of launching a startup company. But it’s much easier said than done. If you don’t have a clear target audience in mind, your marketing campaigns are going to cost you a fortune. You’ll also have low conversion rates, and your customer acquisition costs will be through the roof. Marketing to everyone and anyone is simply a waste of effort, time, and money. Instead, focus your branding and marketing strategies on a specific group of people who genuinely have a need, want, or interest in your company. Cash in the bank is essential for every business, but it’s their lifeline for startup companies. If your marketing campaigns are unsuccessful, your startup is going to bleed money. Take a look at the top reasons why startups fail and find out what makes successful startups.
Let’s focus on the two most common ones.
Reason 1: 48% of startups failed because there wasn’t a market for their offering.
That’s why identifying your market needs to be one of the first steps. If you discover there isn’t a market for what your startup has to offer, you can go back to the drawing board and try something else before investing too much time and money.
Reason 2: 35% of startups failed because they ran out of money.
Spending your valuable marketing budget on the wrong target audience could cause your company to go out of business. With limited cash in the bank, you may not be able to recover from this. But don’t worry. I’ll explain what you need to do to identify your target market, positioning your startup company for success.
Start with broad assumptions, and slowly narrow your focus
Don’t start with a narrow audience right away. Instead, begin with larger groups that you assume may be interested in your brand. From here, you can slowly start getting more specific. Use a few of these general and straightforward segments to get started: gender, age, location. You can also use these broad groups to eliminate people who aren’t in your target market.
Analyze your competition
It’s rare for people to come up with a product or service that doesn’t already exist. While the idea for your startup may be somewhat unique, you’ll still be a part of an existing industry. Other people are already doing what you’re trying to do. You’ve got to find out how to position your company within your industry:
To do this properly, you’ll need to research your competition. Figure out what they’re doing well and what needs improvement. Whom are your competitors targeting? Look at their advertisements, visit their website, join their email subscription lists. You can attempt to go after the same target market or focus on a group your competition may be overlooking. Look at the graphic above as a reference. Are you going to target a niche audience or sell products for the masses? Will your brand have high-quality products/services at a premium price, or are you planning to target cost-sensitive consumers? It will be easier to answer these questions after you research the competition. Analyzing your competition can help you increase profits even after your startup launches. Competitive analysis can also show you how consumers behave in this industry.
Ideally, you want to build long-lasting relationships with your customers. But this idea can vary based on your products, services, brand, and industry. You need to adjust your target market accordingly. For example, let’s say your startup company sells cars or similar products. A customer today may not be ready to buy another vehicle for another decade. In this case, you can’t rely on loyal and repeat customers. Instead, you’ll have to focus on customer acquisition strategies. Find out how your competition can continually market to different customers and whether their campaigns are successful.
The study of competitors is just part of the overall development strategy of the company and product. Breakthrough solutions creation is impossible without thorough research of your product development and business strategy. This is why we here at Jetruby created a startup development methodology that allows you to launch a startup with minimal time and cost losses. Leave a short description of your distinct idea or a task on our very first and free advancement action: Product Development Strategy Session. And we’ll contact you in no time!
Talk to people
While making assumptions and analyzing your competition are logical places to start, those strategies will only get you so far. If you want to focus on the ideal target market for your startup company, you need to put in much more work. You need to speak to consumers. See if your assumptions are correct. Conduct one-on-one interviews, and use focus groups to test your hypotheses. For example, let’s say your brand’s general target market is women between 25 and 40. It’s a huge percentage of the population. You’ll have to come up with other ways to segment that target market into smaller groups genuinely interested in your brand.
Focus groups and interviews can give you more information about potential consumers for your company. Your focus groups should have 10 to 12 participants. Show these people different products, services, or marketing campaigns your startup is planning to use. See how receptive they are to what you’re showing them. Find out more information about the people who have a positive reaction. If you’re interviewing only women between the ages of 25 and 40, what other similarities do they have? For example, you might find out that all the women who liked your products were married. You could also discover that women of a particular social class or annual household income were more receptive to your brand than others. Make sure you find out as much information as possible about everyone in your focus groups. Use the market segmentation graphic above as a reference. Have all of your participants fill out a questionnaire before the interview or focus group starts. But realize you won’t find out everything you need after just one session or interview. This market research phase is an ongoing process. The more people you can talk to, the more accurate your data will be. As a result, it will be easier for you to identify your target market.
Create customer personas
Now that you have a better understanding of your target market create customer personas to learn even more about their buying behavior. A customer persona will ultimately help you market to this audience. Here’s what a customer persona looks like: Make the persona specific to your company. You can tell the example above is for a business selling shoes. This customer persona has trouble finding shoes that fit her because she has narrow feet. Now, your startup company may sell shoes to both men and women. But each persona needs to be unique. Your general target market in this segment may be:
- 30 to 40 years old
- $30-45k annual salary
- lives in the western part of the United States.
Your customer persona has to be more specific. Notice that the example shows a woman who is:
- 36 years old
- $38k annual salary
- located in Los Angeles, CA.
Do you see the difference? The results of your interviews and focus groups can help you create these customer personas. Not all of your customers are shopping for the same reason. The purpose of the customer persona is to figure out the psychological and behavioral shopping approaches to consumers within your target market. Suppose you identify that a large portion of your target market has a similar occupation or lives in the same part of the country. In that case, you can adjust your marketing campaigns accordingly.
Once your startup launches and you start getting sales, you can use customer surveys to find more information about your target audience. These surveys can help show your customers how much you care about them. You want to find out more information about your customers so that you can improve their shopping experience. But you’ll also use those survey results to identify your market. Find out who they are and what they are using your products or services for. Get information related to their:
- geographic location
- psychographic traits
- behavioral trends
Earlier I told you to start by making assumptions about your potential target market. But now that you have actual customers, there’s no reason for you to assume. You’ve got real people who were drawn to your startup company. This is your target market. Now you need to figure out exactly who they are to target other people in this segment.
Take advantage of analytics and other resources
I’m going to assume your startup company has a website. If it doesn’t, I hope you’re in the process of building one ASAP. Who is visiting your website? The traffic to your site can be a good indicator of your target audience. Google Analytics can show you who is visiting your website.
This is an example of demographic data you would be able to get from these analytics. The traffic from this sample is primarily males between the ages of 18 and 34. Google takes these analytics one step further and displays other information such as:
- bounce rates
- pages per session
- average session duration
- new users.
The reports are generated and grouped by demographic information. It helps you identify which users on your website are the most valuable. That’s how you can determine your target market.
As you can see, identifying your target market is a long process. When you first get started, you’ll need to make general assumptions about your prospective customers since you don’t have any concrete data yet. Slowly begin to narrow down that market based on your brand, products, services, and industry. Use competitor analysis tools to see who is getting targeted by other businesses in your industry. Are you going to take the same approach? Or will you focus on a different segment? Talk to people. Interviews and focus groups are a great way to help you narrow down your target market. Customer personas allow you to focus on specific customers with unique needs. Once your company starts getting sales, try to survey your existing customers to find out more information about them. You can also use online analytics tools to see who is visiting your website. Just be ready to make changes. Your initial assumptions about your target market may be wrong. That’s okay. As long as you can adjust your marketing campaigns based on new information, your startup company will survive and thrive.
Want to be next on the list of extraordinary ideas but are afraid to pick the correct tech pattern? Or are you afraid to fall with your vision and end it like that? Put your sorrowful worries away and call JetRuby today! We are an experienced and professional digital firm that supports and assists different tech start-ups. We guide them through the development procedure from point A to point B breaking down every step. Our specialist discusses the development priorities and supports their innovative idea. So what’s holding you back? Leave a short description of your distinct idea or a task on our very first and free advancement action: Product Development Strategy Session. And we’ll contact you in no time!