Identifying Your Target Market and Customers

Three Key Questions

Your next step is identifying who your target market and ideal customer are. This will help you narrow down your business’ focus and ensure you are putting your efforts in the right place. The goal of this stage is to help you identify three things:

  • Who are my customers?
  • Where are they located?
  • How do they think and behave?

Step One: Theories

You should have some idea of who your customers will be based on your groundwork so far. (If not, it might be a good idea to return to that phase and do more outlining and analysis of your idea.) So, start by writing out your assumptions and theories:

  • What is the basic product concept?
  • Who will be my customers?
  • What problem will the product help them solve? (Your problem statement can be used here.)
  • What geographical area will we be targeting?
  • What demographic will we be targeting? (Think beyond age, gender, and ethnicity. Consider value sets, passions, and skills.)
  • Who will our competition be?
  • What type of market will we be operating in: an existing market, a new market, or a niche market?

Get as much help as you can with this stage. Involve people who will be part of your business, experts in your industry, your mentor, and any other stakeholders.

Step Two: Testing

Next, create a list of at least 50 potential customers. With these people in mind, prepare your product test. Here are some ideas for product testing:

  • A presentation of the proposed product or service and how it will solve their problems
  • A hands-on demonstration of a prototype
  • A preview of a television episode in front of a focus group

Be sure to have specific questions for participants to answer after the test, such as:

  • What was your favorite thing about the product/service?
  • What was your least favorite thing about the product/service?
  • Here are three approaches we could take for this product/service. Please tell me what you think about each of them.
  • What problem would this product or service help you solve?
  • How would you use this product?
  • Who would you recommend this product to?

You will also want to prepare a customer insight survey, with questions like:

  • How much of your typical day is spent on…?
  • How much money do you spend on…?
  • What processes do you have for…?
  • What is your biggest problem with…?

Keep this survey short and to the point to ensure maximum participation.

Now, ask your potential customers to participate in the product test and insight survey. Be very clear that this is not a sales pitch; you’re looking for their feedback so that you can help them solve a particular problem. Be open-minded during this stage. Encourage criticism, what-ifs, and new ideas. You will probably hear new information that you had not yet considered. It can be hard to incorporate that into your vision, but it is essential for your business’ success.

Remember what Sam Walton (founder of Wal-Mart) once said: “There is only one boss: the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Step Three: Take It All In

After the product test and customer insight surveys have been completed, it’s time to evaluate what you have learned and see if your theories were right or wrong. Be open-minded and objective when evaluating the data.

In most cases, you will find that you were right about some things and wrong about others. This means that you will want to adjust your theories, tweak your product test and insight surveys, and conduct another round of testing. (The amount of re-testing and re-evaluation required will depend on the complexity of your business idea.) In the end, you will have a solid description of what you will be selling, who you will be selling it to, where those people are, and what their mindset is.

Developing Your Value Proposition

Now that you have a solid business idea in mind and you know who you will be marketing it to, it’s time to outline your business’ value proposition. Your value proposition tells customers why they should buy from you by describing:

  • Your product or service’s features and benefits
  • The value of the product or service (including its experience)
  • What it will cost (in generic terms)
  • Why it is unique
  • Who the customer is
  • How it will help the customer

Ask yourself: “What are we promising our customers? Why is it valuable to them?”