How to define your target market

Be sure you can clearly articulate the market's needs and opportunities.

Having a clear definition of your target market is vital for several key reasons: 

  1. Brand identity. The market that a practice serves helps define the identity of its practice and the company’s “brand promise.” A small company that tries to serve a broad market typically fails at keeping its promises. This is a key aspect of one’s values: Keeping promises is all about trust. 
  2. Market differentiation. Aligning all resources to serve a target market puts “all the wood behind the arrow.” It creates alignment of resources yielding depth in products, services, knowledge and reputation. The more clients you have in the target market, the stronger the brand and the more refined your approach, products and services become because you are serving similar clients.
  3. Cost containment. Each new target market requires new or adjusted marketing collateral and programs, products and training. Selling the same product to 100,000 people is cheaper than selling two different products to 50,000 people each. 
  4. Revenue generation. References flow within market segments. Like-minded people congregate in real and virtual communities, clubs and schools. Word of mouth is enhanced as you succeed deeply in a market. A company becomes the de facto standard for the product or service in that target market.

Once you have a target market definition in mind, imagine that you are meeting with a venture capital firm and preparing to solicit $1,000,000 of funding to further your practice. Let’s assume they know nothing about your geography, products or market. What information would they want to know before they write the check? What information would you provide to them to substantiate your request for their funds? How well could you describe your specific market opportunity? Here are a few questions you might consider answering about your market: 

  • Is it growing? 
  • If so, in what segments or areas? 
  • What are the demographics? 
  • What is happening to the population? 
  • Is it growing or shrinking? Is the ethnic mix changing? 
  • Who are the major employers in your marketplace? 
  • Is their industry contracting or growing? 

Go to your chamber of commerce websites and begin collecting relevant information about business growth in your communities and markets. This could take weeks or months to do correctly. Using a three-ring binder, simply gather information as you go and file it under a “Market Assessment” section. You will begin seeing trends and information that have direct impact on your business. You may begin to see opportunities or macro movements that could be capitalized on in your plan — trends or movements that heretofore you have likely not seen or recognized. 

As you review and assimilate all this information, begin to distill the most salient points down on one or two pages. I like to have a couple of pages that detail in bullet point form where the market opportunities are and how they are evolving. This understanding of your market will ultimately influence your marketing efforts later.

Tyler Norton is the founder of Hero Partners and a founding partner of The Hyde-Norton Group; Jerry M. Toombs is an MDRT member from Logan, Utah, USA.