Carefully defining your market can help you make better decisions in almost every area of your business. This article will outline some different ways of thinking about your market, and how to create personas for different segments of your market. It will explain how you can use this information to set goals, plan budgets and find opportunities. A Mentor can help you bring all these things together in your business and stay on track to succeed.
Start by thinking of your market in the broadest sense
You can evaluate your market by dividing it up in various ways. This will help you measure the potential for your business, set goals and plan budgets. The biggest group is called the Total Addressable Market – known as TAM. That’s everyone that could possibly buy from you, ever. You’d only reach all of them if they had no other buying choice, and that’s unlikely. So, within the Total Addressable Market is a subset of those you could actually sell to. This is referred to as a Serviceable Available Market – SAM. This considers things such as geography, language, and whether people use alternative products to what you offer. Finally, within this is a smaller group of customers you can realistically capture. We call this your Serviceable Obtainable Market, or SOM and it’s what is usually meant by a target market.
Understanding the size and value of your target market shows you how much potential it holds for your business. You can use existing research and do some of your own to find out things like how many people there are and how much they typically spend on certain things. Statistics New Zealand has a tool that can help you with some of this, called Market Mapper.
Understanding your market helps you decide how much to invest
When you can assess how many people are in your target market, and how much they’re likely to spend with you, you’ll then be able to decide how much to invest to reach them. If you have salespeople, you can make sure their targets are a healthy stretch, but not unrealistic. If it looks like you have lots of high-value customers, you might choose to invest more in marketing because of the potential payoffs. You can also avoid spending too much on marketing to a limited group.
Personas can help you understand fine details of your market
A persona is a fictional representation of your ideal customer in your target market. You can draw on your research and experience to create a persona that reflects the typical background, goals, and preference of your ideal customer. It’s handy to have a persona for each main type of customer you have. As an example, a calligraphy ink business might segment its customers into types such as stationery stores and retailers, wedding or event planners, professional calligraphers, and hobby artists. You could make a persona for each of these.
Hannah, the Hobby Artist, could be a persona representing a customer for your ink business. She’s ideal as she’d buy a lot of ink, year after year. Try and put yourself in her shoes by thinking about demographic details as well as her motivations, challenges, and influences. What barriers does Hannah face when she wants to buy ink? Is it hard for her to find parking near a city store? How does she decide which brand to buy? You might quickly realise that Hannah, the Hobby Artist chooses things she sees on Instagram and prefers to buy online. You could then reach people like Hannah by marketing your online shop with digital advertising.
Look at the whole picture of your market when you make business decisions
Understanding your market from the broadest to the finest detail will help you in all kinds of business decisions. It will help you check if there is enough potential reward for your investment, set targets and make the most of sales opportunities. If you’d like help on better understanding your target market or reaching them more effectively, then maybe a mentor could help. At Business Mentors, we have a team of people ready to share their experience from a range of industries. To find out more contact us.