How to Conduct a Target Market Analysis 7 Steps
Organizations cannot appeal to the entire general market, as products and services always attract specific customer groups. Therefore, businesses need to investigate their current customer base to determine what demographic of shoppers purchase each product line.
By conducting a target market analysis, companies can better understand what drives their customers to make a purchase and their common pain points. This makes it easier to create impactful promotions and introduce new products.
What is Target Market Analysis?
Firstly, a target market is the audience that contains the primary consumers of a company's products, otherwise known as the customer base. Understanding the target market enables organizations to improve their services, customer support, and shopping experience.
Defining the target market requires organizations to research the average customer's
In order to truly understand the customer base, businesses need to determine their values, lifestyle, needs, and preferences by conducting a target market analysis.
A target market analysis assesses a company's product range and clientele to determine where products will find the most success. This enables businesses to finetune their marketing strategies to boost sales, customer reach, and overall performance.
Businesses that invest time into target market analysis are able to
- Identify the most valuable markets
- Develop buyer personas
- Pinpoint market gaps
- Test the longevity of products
- Penetrate new markets
- Improve business strategies and overall decision-making
- Optimize product development
7 Steps for a Target Market Analysis
In target market analysis, businesses need to answer critical questions on products, services, shoppers, and purchasing patterns.
1. Conduct Research
By defining the target demographic, companies can optimize their product development, marketing campaigns, and customer experience to maximize sales.
However, the target market scope can vary based on the business's research capabilities. Some organizations may find that their average customer falls within an age range, while others may narrow it down further to age, gender, and region.
Companies need to at least address the key target market questions.
- Is the target market large enough for the company's inventory?
- Does the business model need changing to gain better appeal?
- Do the products and services need to be tailored to maximize sales?
- How can the marketing team optimize their target campaigns and customer reach?
2. Develop Customer Profiles
Shoppers that consume the same products and services typically have similar qualities that enable companies to use a specific marketing tactic to attract the target audience.
These shared characteristics are combined to form customer profiles, or buyer personas, that make it easier to identify target shoppers. Managers should start by focusing on demographic specifics.
Once these traits are outlined, managers can also add psychographic data.
- Purchasing habits
- Product preferences
This list can go as in-depth as companies like, but the more personal answers will need to be generated through surveys.
3. Create Segments
Customer segments group buyer personas into more specific categories for further analysis. However, this can only be done after thorough profiles are defined. Many new companies are afraid of being too specific during the research stage because they believe it will limit their data yield. However, specific consumer traits are necessary for creating impactful marketing promotions.
Once customer segments are developed, management can dissect the shoppers' preferences, buying patterns, and pain points.
4. Use Analytics Tools
There are several online resources available to businesses that generate market segments based on data inputs. Many of these tools also analyze potential customers and businesses competing for the same target market.
However, businesses often find that these solutions do not have the same detailed findings as manual research yields. Therefore, management should collaborate this data with their own to optimize results.
5. Evaluate Competition
No matter how specific a market segment may be, there will always be businesses competing for the same customers. Therefore, management needs to define their biggest competitors and determine
- What do customers purchase from them?
- What are their pricing strategies?
- What social media sites do they generate the most engagement from?
- According to reviews, what are their strengths and weaknesses?
Analyzing competition allows organizations to finetune their own strategies to take advantage of market gaps.
6. Research the Target Audience
Now it's time to take the research further by using the general customer information to define the target audience. In order to generate specific details, many businesses
- Send Surveys via mail, email, and social media to loyal customers.
- Conduct Interviews in-person with general consumers whom employees feel might fit their target market.
- Hold Focus Groups to generate consensus feedback from shoppers that share characteristics with the customer base.
7. Conduct an Internal Audit
Now that the competition and customer base are defined, companies need to take a holistic look at themselves. By conducting an internal audit, organizations can determine
- Are there enough customers for a new product?
- Will the target audience benefit from the product?
- Is there a current need for the product or service?
- Will the product generate repeat purchases?
- Is it clear what drives the target market?
- Can the target market meet the prices?
- How can the business reach the target market?
These questions narrow down how companies can initiate market penetration and optimize customer reach.
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