LESSON 2 Target Market Research

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LESSON 2 - Target Market Research
 Introduction Identify a business that is your
personal choice for a specific product or
service, then determine what characteristics you
have in common with their other customers.
You do what you are."                    
...Dr. Alex Cross (in the movie, Along Came a
Spider)
Objectives  Identify the who, what, where,
when, why, and how characteristics of your
central target customer. Clarify a plan to
best intercept your target customer.
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Lecture Point One

• Market research can be the most frustrating and
  time-consuming part of your start-up effort. 
  However, the time spent on narrowing your market
  scope and more clearly identifying the location
  of your target will produce a better yield for
  your marketing efforts.  The focus of this effort
  will be to find the following about your
  customers
• Who  demographics and psychographics
• What  unmet wants and needs
• Where  their preferred location to buy
• When  buying patterns, cycles and trends
• Why  buying motives and purposes
• How  shopping strategies

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Your target market isn't everyone!  Here is where
the Pareto principle comes into play.  What, who
is the Pareto principle? This principle holds (in
the small business setting) that 20 of your
customers will be responsible for 80 of your
sales.  It's your duty to know who those 20 are,
and attempt to get more like them.  To clarify
what is meant by that 20....It refers to the
character of your customer. 
20
Target
Other Customers
Typically, a business will draw many types of
people--some merely look-in as they walk by,
others come in but don't buy anything, others
will occasionally buy small amounts but your
target customer (that 20) will buy a lot and
come back often.  The two darts in the center
(20) represent your target customer. It's your
job to know the who, what, where, when, why, and
how of that target customer.
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It's likely that you already know what the
concept of demographics is--descriptors of your
customer like age, gender, salary range, etc. 
Clarify this aspect to the point that you will be
able to recognize your target when he/she enters
the door to your establishment.  Once you have
narrowed this to a select group, you can examine
their psychographics.  This brings into
consideration their attitudes (product
perception--positive or negative), activities
(when they buy--happy hour, theater discount
hours) and opinions (recycling is good).  What do
they do for fun?  What is their political,
religious, and interpersonal makeup?  This isn't
easy to see, but if known, helps you determine
where and how to catch their attention through
your marketing communication.
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• Now that you have a clear idea of that central
  target customer, you must examine their core
  needs as they relate to your business.  What
  value do they place on the purchase of your
  product/service?  Is it as casual as buying a
  pack of gum or is it as serious as choosing a
  pain medication at a time of need?  
• Abraham Maslow classified human needs into five
  levels
• physiological needs (basic needs like food,
  drink, rest sex)
• safety needs (physical well-being including
  health and exercise)
• social needs (interaction with others and feeling
  accepted)
• esteem needs (recognition for accomplishment,
  success)
• self-actualization (achieving ultimate worth as a
  human being)
• (click to show graphic of Maslows hierarchy)
• It would be valuable to examine these motivations
  to determine at what level your target customer
  gets need satisfaction from your product or
  service.  Let's take some time to apply some of
  these ideas to an actual business settingdo
  Study Quiz 2.

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Lecture Point Two
Your ability to intercept the customer is
critical.  Knowing their buying habits--do they
want to physically touch the item or do they like
the convenience of Internet or catalog shopping? 
Do they look for your product/service on the way
to work, on the way home, or sometime during the
day?  What path do they take to seek satisfaction
of this need? What is the frequency of their
purchase activity?  Is it closer to the daily
purchase of a newspaper, or as infrequently as
the purchase of a home?  Knowing their routine
will assist your approach and possible
auxiliary services to assist their
purchase. Intercept them when and where they
need your product/service.
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Do you remember the last paragraph of Lesson
One?  Just checking...the key sentence was,
"Always ask yourself, "why is this customer
buying from me?" and continually shape your
offerings to meet those needs. It is really
important to assess your customers logic, not
only for buying the product or service in the
first place, but why are they buying it from
you?  You should know the answer to that question.
So, here are some questions to help you get to
that answer First, determine the actions of the
target--be sure to focus on the primary
decision-makers.            How are the
decision-makers influenced?  Who influences
them?  What events motivate their purchase? 
Are they brand-loyal?  Are they early-adopters
or do they follow others?
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Finally, you should identify the level of energy
spent on shopping for your product/service. 
For convenience items, customers want to get
in, buy, and get out quickly.  They don't have
time to think about it.  Notice the ease of
access to this AM-PM convenience storeeasy-in,
easy-out.
For more expensive items, customers will want to
compare and contrast the alternative choices. 
You'll want to locate where they can accomplish
that comparison effort most effectively. These
car dealerships are located adjacent to their
competitors.
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Lecture Point Three
For the entrepreneur that focuses on business
customers, other factors might be more important
to your decisions.  In your case, you would look
for leading indicators that point you to logical
targets.  For example, a medical transcription
service provider is dependent on medical doctors
offices.  Therefore, factors (like the number
of doctors offices in the area) that contribute
to the increase in numbers of medical offices
would be important to examine.
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In most cases, you will want to focus on the type
of business that will find your product/service
more appealing.  Once you have exhausted all the
possibilities in that category, move to another
category of business that displays the next-most
promise.  For example, I had a snow plowing
business that started with social clubs, banks
and churches because they had big lots and were
very concerned that their parking lots were
cleared of snow. Then, once established, I
branched-out to convenience stores, then to
motels (in order to extend my service day). If
you specialize, you will gain more credibility
in your customer's perception of quality. Of
course, this Idea didnt really catch-on in
Phoenix!
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Your assignment for Lesson Two will be a  Target
Market Analysis. It is probably the most
important exercise you will do in this course
because it helps you to clarify specifically
who your product or service is intended to
satisfy.  Be sure to clarify in your mind
who comprises the center of your
target--ignore those customers (for the sake
of this effort) that, even though they will buy
occasionally, will not be the consistent,
heavy-user of your product/service.   I have
also provided a second version of the Target
Market Analysis for the business-to-business
entrepreneur. If you intend to market your
product or service to other businesses you should
use this one because it considers other
parameters more consistent with the business
mindset.
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Study Quiz on Market Analysis (Chapter 11)

• What characteristics of a business will cause it
  to have a unique selling proposition?
• 2. How does demographic information help
  identify the target buyers?
• 3. What is niche marketing?
• 4. What is a channel buyer, and what
  influences their purchase of goods or services?
• 5. Explain the three rings of direct and
  indirect competition.
• 6. What factors are important for you to
  know about the competition of a business?
• 7. What sources would be helpful for
  locating secondary market research?
• 8. Explain the kinds of primary market
  research that might be possible for a small
  business
• owner.
• Identify the factors that influence the general
  business environment.

Click here for e-mail link to your instructor.
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Target Market Analysis--Consumer
1. Identify the age and sex of the primary
decision maker. 2. Identify the economic
level of the primary decision maker (based on
probable occupation, and education level). 3.
Describe the primary decision makers probable
social and leisure activities (e.g.
outdoor type, likes hiking, camping and/or
skiing). 4. In what general spending category
is your product or service? (e.g. video rental is
part of entertainment budget, competing with
stage plays, movies, athletic events, etc.) 5.
On a scale of 1 to 10 (10can't do without
1impulse purchase), compared to other purchases
he/she makes, what priority does your customer
place on the purchase of your product or
service, and why. 6. What other products or
services are expected to accompany your product
or service? (e.g. buying ceramic tile will
require installation training and purchase of
tools and grout) 7. When does your customer
first recognize the need to buy your product or
service? 8. What steps (identify 1, 2, 3,
etc.) will the customer take to seek-out your
product or service? 9. Identify one or two
strengths and weaknesses your business has in
relation to your target market.
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Target Market AnalysisBusiness to Business

• Describe the type and size (buying power) of the
  businesses you are selling to.( e.g. retail,
  service,
• heavy manufacturing)
• 2. Identify the organizational level (decision
  power) of the buyer (e.g. buyer, dept. head,
  owner)
• 3. Describe the type of market the business sells
  to. (e.g. consumer products, manufacturing,
• regional, local)
• 4. Describe how the unit cost of your
  product/service influences the buying decision
  (the higher-cost
• items require higher-level the decision,
  requires a demonstration or presentation)
• 5. Describe how important this purchase is,
  compared to other purchases made by your
  customer.
• (e.g. cleaning supplies vs. subassemblies used
  in manufacture of their own product)
• 6. What other services (or products) are expected
  to accompany your product or service?
• (e.g. delivery, installation, training)
• 7. When does your customer first recognize the
  need to buy your product or service?

Click here for e-mail link to your instructor.