How to Identify the Target Market for Your Startup.
Nothing beats the excitement of coming up with something cool. That cool idea comes to mind and you can’t wait to develop the product.
I mean, who wouldn't get excited when they think of building a social app and they know how to build one. But this fairy tale would soon hit a roadblock when a few people really buy into the idea. At first, the idea seemed plausible enough that it got you working on it, but you later realise there are only a handful of people willing to use the product.
Most founders only think of startup ideas without putting into consideration if there is really a market for that product.
That’s why 42% of startups fail. They come up with a product or service no one really needs.
The time, money and effort it took you to build the product only to be just another stat. But hey, you could just as well be among the many successful startups.
We’ll get to see how you can identify your ideal customers and how by doing so you can set your startup up for success.
Why most startups fail
You might see a problem that seems interesting to solve and decide to come up with an idea that solves it. You turn that idea into reality and develop an exceptional product that will tackle that interesting problem.
But in reality, if that product doesn’t solve a market need, a large enough of a problem experienced by a group of people, your potential customers, then the startup will eventually fail.
In fact, in the same study that found 42% of startups fail because of no market need, Treehouse Logic, one of the failed startups, had this to say:
“Startups fail when they are not solving a market problem. We were not solving a large enough problem that we could universally serve with a scalable solution. We had great technology, great data on shopping behaviour, great reputation as a thought leader, great expertise, great advisors, etc, but what we didn’t have was technology or a business model that solved a pain point in a scalable way.”
The exact step of coming up with a product before identifying the target market is the primary reason most startups fail.
You come up with everything, from the amazing product to the advanced technology used. But if there aren’t people buying the product, then your resources would be drained much faster by trying to market to people not interested in the product or service.
How do you define a target market?
A target market is simply a group of people most likely to buy your product or service and whom you direct marketing efforts to. You develop marketing strategies tailored to your target market.
So rather than spending marketing dollars on everybody, trying to maximise your reach, you spend on people who are most likely to buy your product.
Importance of identifying your target market.
What if you could kill two birds with one stone?
By defining your target audience, you spend money wisely and tackle problems that serve a market need.
With running out of money and having no market need being the two primary reasons startups fail, having a defined target market will help in:
- Boosting profitability.
By focusing on your target market, you get to bring in more customers whom you scale your startup with. The more ideal customers come in, the higher your customer retention rate, leading to an increase in profits because you are solving a large enough problem that your customers want to get rid of.
- Reduce marketing cost.
It seems logical to market to everyone. You get to reach a large group of people, increasing your chances of getting them to buy your product. You run a marketing campaign, your exposure increases as you get to be seen by many.
But you’d burn your marketing budget as you try to reach different audiences with mixed marketing strategies.
When you target your marketing strategies to a specific group with common characteristics, your marketing message speaks directly to them. Most of your marketing would therefore be focused and intentional rather than all over the place spending marketing budget on people not interested in your product.
How to identify the target market for your startup.
Knowing who you are talking to helps you focus your marketing efforts on a specific group of people and create targeted messaging aimed at that group.
Nike’s target market and customer base are professional athletes. You can clearly see this from their messaging on social media to their website.Athletes would identify themselves with the messaging Nike uses. Nike’s marketing is more focused and targeted. Aimed at people who are likely to buy their products.
Here’s how you can identify your own target market and create customer profiles for your startup:
Use the 4 Whys. (they are usually 5 but we’ll use 4)
That is, who, what, where and why. These questions are basic in information gathering. They are used in police interrogation, journalism, and research.
For us, we will use them to identify your target market.
Who questions fill in the external traits of your ideal customer. They give you a picture of who your target audience is.
They give you an overview of their:
- Education level
- Marital status
- Income level
The importance of this information is to better understand your target market. The information you gather should relate to your product and influence your marketing strategies.
For example, if knowing their education level won’t change how you market or develop your product, then there’s no need to have that kind of information.
How can you answer the “who” questions?
By running surveys, you can describe the traits of your target market. They give you a broad capability of getting accurate targeted results. You can run social media surveys, email surveys, and mobile surveys.
- Competitor research.
Tools such as Semrush gives you an overview of your competitors and the ability to conduct market research. You can identify who the key players in the market are.
This gives you a bird's-eye view of companies you are up against. Their individual market shares and the general market.
On top of that, you can get the location of your target customers. Where your competitors get most of their traffic will be where your target market is based.
Knowing this might influence where you base your marketing efforts on. If most of your competitors are marketing to the US market, you can choose to base your marketing efforts in the US to attract potential buyers.
Information such as age, gender, and interests can influence the development of your product and the messaging you can use in your website copy and marketing strategies.
These questions reveal more of the internal traits of your primary market. The key desires that will drive them to buy your product.
- What are their pain points/ problems they are experiencing?
- What is their emotional motivation that would make them purchase from you?
- What frustrates them the most with the available solutions?
Answers to these questions will help you be specific in your messaging by directly addressing their key problems and developing your product to satisfy their desires, needs and important of all solve their main problems.
How can you answer the “what” questions?
- 5 Why analysis
This involves asking why 5 times until you reach the root cause of a problem. It necessarily doesn’t have to be 5 times, just as many times until you reach the possible root cause of your ideal customer’s problem.
By using this analysis, you get to drill down to your target market’s emotional motivation and the problems they are facing.
- Social media
Social media can be an effective social listening tool. People express their frustrations and joy on social media. When someone has a bad experience with a competitor, they will lay it out on social media. This gives you a chance to pick out on key areas most people are frustrated with and gives you an opportunity to improve your product based on their needs. So when you hit the market, your product would address their main pain points.
Surveys can also give you a more honest overview of what motivates or frustrates your target market. Because most surveys are anonymous, respondents would be honest and give accurate information.
- Online forums and communities
These include platforms such as Reddit and Quora. People openly ask their burning questions, giving you an opportunity to pick out on the problems faced by your target audience.
These questions reveal the places you’d find your ideal target market. Where they mostly hang out.
- Where do they research solutions for their particular problem?
- Where do they finish their research before making a purchase decision?
- Where do they hang out more? The Facebook groups, websites, publications.
When you nail down where they hang out, you get to learn how your ideal customer interacts, thinks and expresses his/her problem. The language they use can inspire your website copy because you’d know how exactly they express their problem. You get to also know where you’d spend your marketing efforts and influence their decision making.
How can you answer the “where” questions?
- Social media
By searching for thought leaders and influencers in your industry on social media, you get to identify where your target market mostly goes to seek information and advice. So when you launch your startup, you can create a partnership with one influential person in your industry to tap into his/her loyal fanbase.
- Forums, groups and online communities
These include Facebook groups, Slack groups, Twitter, Reddit and Quora communities. You can find active groups on each of these platforms by a simple search. As for slack groups, they can be found by a search on Google or group links found in conversations between people on social media. Once you identify the platforms your target market mostly hangs out in, you get inside information on their purchasing habits and decision-making process.
By now you have an overview of who your target market is and what their desires are. Through a simple survey, you get to know which publications, websites and blogs they visit. It’s as simple as giving multiple choice answers and having them choose their favourite sites or have a fill out section where they write the names of the websites they mostly visit.
These types of questions give you an idea of the purchasing habits of your target market and how you’d develop your product.
- Why haven’t your competitors solved your target market’s problems? It may be because the cost of addressing the problem is high compared to the number of people experiencing that problem. You will find this by conducting competitor research.
- Why would they choose your product over your competitors? This would have you analyze how different you are to your competitors and decide how you’ll position your solution in the market.
How can you answer the “why” questions?
Through anonymous surveys, you can get the genuine reasons why people still feel their needs aren’t met. The available products might be expensive or are not comprehensive and tailored to them.
Then if the cost of developing your product and meeting their needs is sound and logical compared to the size of the problem, you will have a value proposition to enter the market with.
Having some kind of representation of your ideal customer will guide you in determining if there's a market need and how you’d position your solution in the market.
By carrying out the research we’ve gone through, you’d know where your target market hangs out, who they are, what problems and challenges they face and why their need hasn’t been met yet.
All this would ensure you create a startup that solves a market need and create a marketing strategy where you’d spend your money wisely.