How to Define Your Business Target Markets

In my experience, defining your target market is crucial for business success, as companies that skip this step often see high failure rates within their first three years. This article details the five essential steps to accurately defining your market.

• Importance of Target Markets: Defining your market, aka a segment of your audience with similar traits, is essential for tailoring your products and marketing for maximum engagement and return on investment.
• Product Analysis: Begin by listing the benefits of your products/services, connecting them to audience problems, and then refining your understanding with specific demographics and behaviours.
• Customer Base Analysis: Review your existing customers, particularly repeat buyers, to validate your assumptions and gather feedback that helps further define your market and potentially update your offerings.
• Competitive Analysis: Learn from competitors’ successful and unsuccessful campaigns and customer feedback to avoid pitfalls, differentiate your business, and strengthen your overall value proposition.
• Continuous Evaluation: Treat market definitions as evolving assets; regularly test your assumptions and adjust personas, using methods like soft launches to stay relevant against new market threats.

Read on for a detailed breakdown of how to execute each of these steps.

By Mark Johnston

Mark Johnston is a Business Advisor at TEDCO Business Support Ltd, combining banking expertise and first-hand business experience to guide entrepreneurs from start-up to growth.

All posts by Mark

A target market is a segment of your audience with specific characteristics, who you aim to turn into customers. In simple terms, these are the people you want to sell to.

Similar to buyer personas or avatars, each market will contain people with similar demographics, buying power, needs and wants, and so on.

By understanding your target markets, you’re able to tailor your products, services and marketing activity in order to get the strongest engagement and return on investment. In my experience, when new businesses don’t take time to do this, it can make success much harder. Around 60% on average are forced to close within their first 3 years.

So where do we start? While it would be nice to have everyone as an ideal customer, realistically your markets shouldn’t be too far-ranging. You can’t attract masses of people in exactly the same way, because they’re all different.

On the flip side, if you have very niche target markets, you’ll have to really tailor your messaging. That can sometimes feel financially unviable, which is why defining your markets is often a balancing act.

Understand Your Products and Services

I’d suggest starting with an analysis of your business products and/or services. Make a list of the benefits each offer brings and the type of people those benefits are likely to appeal to. Pull through your value proposition and think about how you solve your audience’s problems and bring value to them. A simple exercise like this will often begin to highlight patterns in your audience.

From there, it helps to go a little deeper and start separating people out by demographics, such as age, location, values and behaviours. For example, you might find that a teenager based in the North, who prefers to buy online from eco-friendly businesses, is a strong fit for one of your offers. Once you start looking at it this way, you can already see multiple avenues for reaching
that persona.

Analyse Your Existing Customer Base

If you already have a customer database, regardless of size, I’d encourage you to analyse their characteristics. This becomes especially useful when you have repeat customers. Do their behaviours fit with the analysis you’ve just completed? Are there any surprises that might change the way you think about your value proposition?

If you’re able to, gather feedback from your customers and use it to further define your market. You can also amend or update products and processes as part of your continual evaluation of the business as a whole.

A soft launch or test launch can also be very helpful here, because it allows you to observe consumer behaviour and the response to your launch at a lower risk, before you go all in.

Look to Your Competitors

While I would never recommend mimicking your competitors, there are still lessons to learn from what they do. Is there a product or marketing campaign that has been really successful, or something that hasn’t gone so well? What are their customers saying about them online?

Learning from others won’t just help you avoid pitfalls, it will also help you differentiate yourself and strengthen your value proposition. It’s worth using the initial market research you completed as part of your business plan or business model canvas to get a really clear understanding of your place in the market.

Evaluate and Evolve

As with many areas of your business, your target markets will evolve over time, especially if you’re branching out with a new product or moving into a new region. I’d always recommend reviewing your assumptions about your market and adjusting them as you go. A soft launch can be a useful part of that process too.

By regularly testing and evaluating your market personas, you’ll quickly spot areas that need tweaking, as well as any new threats to your business from competitors or the wider economy. That helps you stay a supplier of choice for your audience.

Top Tip: We break down how to define your target market and value proposition into practical, manageable steps in our Roadmap to Success. You can take a look or revisit that guidance here: https://www.durhamstartups.co.uk/stage/exploration-stage/

Need help shaping your target market and moving your business forward? Durham Startups can support you with practical advice and guidance. Call us on 03000 261261 to speak with one of our startup solutions advisors and find out how we can help your business grow in County Durham.